Towards a better measure of market balance
Warning: this is a nerdy one as I try to come up with a more accurate measure of market balance.
If you’ve been reading this blog for some time, you’ll know I generally use Months of Inventory (sales / active listings) as a measure of market balance. I use it to construct the market gauge every month, which gives us a simple visual indicator of the current balance between buyers and sellers. The advantage is that it’s simple, I’m not monkeying with the data in any way, and it puts current levels in context with the historical range from the hottest to the coldest markets we’ve experienced in Victoria. The disadvantage is that it doesn’t always feel accurate, and now is one of those times.
I use months of inventory because it is generally well-correlated with price changes. Low months of inventory usually lead to rising prices, and high months of inventory to falling prices. 6 months of inventory is around the level where prices stop rising in real terms: a balanced market.
The other measure of market balance is the Sales to New Listings Ratio, which (once you seasonally adjust it), also correlates pretty well with price changes. About 50% is when prices are stable, with lower levels associated with falling prices, and higher levels with rising.
I’ve compared those two measures before, concluding that months of inventory is usually the more reliable indicator of market balance. But it’s also clear that the correlation varies over time, and sometimes better reflects market balance than others. For example at the current 4 months of inventory, we’re still in a sellers market which usually comes along with healthy price increases. But that’s neither what it feels like in the market, nor are prices increasing. The main cause is that while sales are ok and inventory isn’t sky-high, there’s a lot of new listings coming on which are keeping buyers busy and removing upward pressure on prices.
One way to account for that is to map both the MOI and SNLR indicators onto the same normalized scale, ranging from an extreme buyers market (depths of the GFC) to an extreme sellers market (post-COVID mania). Excuse the colours (I’m not a graphic artist) but here’s what that looks like:
Generally the two indicators come to pretty similar conclusions about market balance, but I believe it’s worth paying attention during the times when they diverge. For example in 2013, prices stopped declining even though months of inventory stayed sky high. A clue was in the sales to new list ratios which pointed at a substantially stronger market. The reverse was true after the stress test was implemented in 2018, when prices flatlined despite fairly strong MOI readings. Today, MOI indicates a mild sellers market while SNLR indicates a mild buyers market. Combined we arrive at a roughly balanced one, which is pretty accurate and certainly more so than MOI on its own. Combining these measures into a single market balance indicator would likely make the monthly gauge better (especially during times of market change) at the cost of a lot more complexity (and becoming a black box to readers).
Fundamentally, the reason MOI is sometimes misleading is due to the fact that it doesn’t fully account for the flow of new listings. It is computed by dividing monthly sales into the inventory remaining on market at the end of the month. However that doesn’t account for any listings that came on to the market and sold before the end. A variant of the the Months of Inventory measure would be to divide sales by the total number of listings that were available for sale at any point during the month. That would be a more accurate measure of how many properties were actually available to buy, and may yield similarly improved results without all the complexity of dual measures. I’ll likely revise the market gauge to use one of those revised systems starting in May.
Also the weekly numbers
| May 2024 |
May
2023
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 111 | 262 | 775 | ||
| New Listings | 344 | 739 | 1356 | ||
| Active Listings | 3102 | 3206 | 2189 | ||
| Sales to New Listings | 32% | 35% | 57% | ||
| Sales YoY Change | +5% | -6% | +2% | ||
| New Lists YoY Change | +64% | +40% | -11% | ||
| Inventory YoY Change | +52% | +52% | +23% | ||
| Months of Inventory | |||||
New lists are not up by as much this week, but sales weakened to make up the difference. They’ve been slipping this month, though I still expect them to end the month fairly similar to the year ago figures.
The sales to list ratio comparison to this time last year shows how much weaker the market is compared to last year.
Last year the market was strong through the spring and summer due to a drought of new listings, and then weakened as the bond market drove fixed rates sharply higher starting in June. Bond yields are down from the peak they reached last fall, but they’ve been creeping up slowly this year which isn’t helping affordability. The market is not optimistic that rates will be coming down anytime soon, and thus I wouldn’t expect a whole lot of life to return to the market soon either.
Janion unit under 300k -> https://www.realtor.ca/real-estate/26846781/320-1610-store-st-victoria-downtown
Not sure why people are hinging on this figure. Pretty obvious they said 0.13% per year. Over a lifetime it’s a lot more.
No surprise that Punwasi is salty though.
More evidence that the proposed cap gains narrative the current federal government is trying to tell is based on falsities. These proposed tax changes will impact many middle class Canadians. Certainly more than the 0.13% that Freeland asserted in her budget speech.
https://betterdwelling.com/canada-thinks-1-in-5-households-are-the-one-percent/
But I like my brand new heat pump and thermal pane windows.
No it’s not “spending” $1.7M. It’s an interest free loan, so the actual spending is the forgone interest.
Having cleared that up, now which sector sees the greatest forgone interest and tax subsidies? Think real hard.
Yay, now we’re all priced out.
Because it makes the majority of households who already own feel richer without any actual increase in productivity, that’s why.
Although not housing related.. a perfect example of why government should just stay out of the way and stop meddling with the free market. Actually surprised to see this opinion piece on the “peoples network” CBC
Ottawa is spending $1.7M for 10 new jobs at a pasta plant. Are these corporate subsidies worth it?
https://www.cbc.ca/news/politics/ev-government-subsidies-corporate-welfare-1.7208003
More precisely, Langley City, which is little more than a downtown. As opposed to Langley Township, which surrounds it and has five times the population and almost all the kids.
Exactly why I got out of the game…There’s just no meat on the bone anymore.
So now you are paying $800,000 for an undesirable lot. So all those thousand of lots in Royal Bay and Westhills that are to be developed. How many are on the real estate board?
None.
25 years ago I was paying 250k for a desirable building lot.
Right down the road from me there’s a building lot listed at 1.2m. But its lake front, fully serviced, and super desirable.
Dead flat 1/4 acre, fully treed, in the heart of Langford.
Its been on the market for 2 years.
Opening up more land for development will only work if that land is offered to as many people as possible. There has to be competition among a lot of developers to sell their lands to contractors. But if only a few land developers parcel out dribble every year – land values are not going to come down.
Let the free market reign!!!
https://youtu.be/8n7YsDpUZZY?si=lLrmxB70ii31DX_X
The NIMBYs are also part of the free market. They are also the ones that tend to vote.
Our problem is that we have let house owners have a free ride for too long by subsidizing house owners property taxes by over charging developers in order to get things like bike lanes. It has also allowed a lot of politicians to keep their jobs. Put those house taxes up to ten grand where they should be – then we will see change.
But you can’t subsidize house owners and then complain that they don’t want change when we created the problem of entitlement in them in the first place. Why the hell isn’t an owner of a million dollar home not paying ten grand or more a year in taxes? Ten grand on a million – that’s frigging cheap!
If they don’t like paying the tax – then they can move to a one-bedroom condo. That’s the free market.
They don’t really. If you look at fees, they are usually lowest for single family. If you look at what’s allowed under zoning, it’s single family but no multifamily on most of the land.
You could argue that the urban containment boundary makes houses more expensive. And there’s no doubt that if we razed the forest up the peninsula and the malahat we would bring down the prices of houses. Debatable whether we should do that, but eventually we just run into geographic limitations on sprawl.
Not a conspiracy, a political philosophy that was out front and campaigned on. As well, 10 – 15 years ago I was in school with people that were going into fields suchs civil engineering, urban planning and law because they believed in influencing things towards such outcomes. Those nimrods have all worked their ways into governments and advise those elected officials. Then combine with nimbys… It’s a nice do nothing outcome. Guess what, people want SFD homes, so why do all levels of government work to make them as expensive as possible?
The only effort to not build enough housing is from NIMBYs yelling to stop development and the city councillors and planners listening to them. No conspiracy needed.
When money is tight, people cut down on discretionary spending (nothing more discretionary than having kids). I do recall chatting with a few folks that this was the goal of eco-led planning being to change society: to have people live smaller lives, on smaller footprints, and in dense urban environments. To achieve this there was a an effort to make things like having a car, a single family house and being able to travel less desirable by making it all more costly. Well, congratulations, the people got the governance they elected and deserved.
I think whatever would be in favor of the “Soylent Green ” approach. Short story, shorter, turn 65 and get ushered onto your next life. It’s quite a pleasant “ending” really. Then they turn you into crackers for the next Gen.
What it boils down to is they believe they know better than the market. If there’s a demand for daycare and someone wants to open one, why stop them? If there really are too many then some will close down. But no, planners believe this kind of thing must be micromanaged.
Most of these daycares are relatively new, opening in the last year or so. (The oldest facilities opened around 2020.) In February of this year, the Downtown Langley BIA wrote to the city to say there were too many daycares. The BIA argued their presence could deter other businesses from setting up shop in the area, although they didn’t specify how, and said the daycares were taking up “previously valuable retail spaces.”
Langley’s politicians and city staffers apparently agree. At the council meeting last Monday, staff recommended Langley City limit daycare spaces in the downtown area and forbid any new childcare centre from opening within 400 metres of any existing daycare. The amendment is similar to the bylaw in place for vape shops, thrift stores, tattoo parlours, “personal service” centres, and pharmacies. (The 400-metre radius is an effective ban on any new daycares from opening up in the area, as the downtown core is only 391m long.)
Related: New study shows that restrictions on daycares just like this one causes a reduction in fertility. https://x.com/arpitrage/status/1792606618896478595
The fertility rate in BC has collapsed in recent years, going from middle of the pack to worst in Canada
I can’t access full story….there must be some context behind that ban, no? Like how do you have too many if there is demand for more?
Meanwhile in the world of insane planning, Langley votes to ban new daycares downtown because they think they already have too many. So instead of letting the market handle this, they want to endlessly fiddle. And then we wonder why people can’t find daycare.
https://fvcurrent.com/p/langley-daycare-ban
Whatever , as a old topper I must vote that idea down as I feel it will hit me in the pocketbook and screw up my dinner and travel plans
This isn’t a huge deal for big buildings but one more piece of policy coming into effect that will have an implact on six-plexes to the tune of $1k per unit in terms of upfront cost. A sixplex with no elevator, no common areas, no complicated mechanicals will also be forced to obtain a depreciation report without the ability of voting against it….money they could simply use for ongoing exterior painting/maintenance.
“The regulatory amendments will do the following:
Remove the ability of strata corporations to indefinitely defer getting a depreciation report by obtaining an annual three-quarters vote;
Require strata corporations to obtain a depreciation report every five years instead of every three years;
Require strata corporations to obtain depreciation reports from a list of qualified professionals; and
Require developers to provide new strata corporations, which are established on or after July 1, 2027 and have five or more strata lots, with funding for depreciation reports. The required funding is a minimum of $5,000, plus $200 per strata lot, up to a maximum of $30,000 and must be paid into the strata contingency reserve fund no later than the date of the strata corporation’s first annual general meeting.
Although the amendments come into effect on July 1, 2024, there are a number of transitional provisions that specify the dates by which various existing or new strata corporations must obtain depreciation reports. To review the transitional provisions, please see Order of the Lieutenant Governor in Council 204 – 2024. “
Did you forget about design?
Since all builders will have to abide by the same regulations, their costs will be the same. The only way to make the project profitable is to pay a lot less for the land.
So let’s raise the Development Cost Charges for a single family home to $300,000 and eliminate the DCCs for multi-family. Properties in the city where the house contributes less than 25 percent to the value of the entire property should have their property taxes immediately doubled to encourage re-development. Eliminate the tax deferral for properties immediately. Encourage more developments with extended care services for seniors so that it is to their benefit to sell the their homes to families.
And lastly….
https://youtu.be/8Sp-VFBbjpE?si=qKJOgSrQGIHa1Sc8
Meh , it all just downloaded on the mortgage holder , so I’m guessing it’s a non starter .
Once this policy spreads to all the muncipalities $10k per site x 100s of sites annually multi-million dollar market up for grabs all of a sudden. The company today only had vans on sites so the equipment can’t be too big/heavy.
I was speaking to a man in his late 80 who said he used to work taking barges out in the straight between port anglers and Victoria and dump the barge loaded with garbage out into the water.
Very likely someone either formally employed or associated with some in either the provincial or municipal government just so happened to have that business ready to go coincidentally when the new rules came into force.
What’s really going on is multimillionaire Marko is mad that bureaucracy is getting in the way of his making even more money.
Very little for sampling. The testing itself goes to different labs.
The problems that I have come across with older areas of housing in Victoria is contamination. There was a multi-family site that was an assembly of three older houses in North Park where a leaking oil tanks was the cause of a million dollars in remediation costs. Another was in Cook Street Village where contamination from a dry cleaner operation that ceased 30 years before had contaminated the site a block away so the home owner couldn’t get a permit to build a new home. Another along the Gorge where a tank leaked a block from the water way contaminating a lot of the properties downhill to the water way. Another in Cordova Bay where the owner removed the tank and was waiting for the test results which could mean the remediation might be $3,500 for just a letter to a million or more depending on how long the tank had been leaking and how far it has spread. Another one in West Saanich where the abandoned home had an oil contract to fill the tank which the oil company did for a year filling the basement with oil which then passed through a crack in the foundation and polluted a stream among farm land. Another property in a mixed development that had a dry cleaning shop 50 years before but the site was polluted as it was customary just to dump the chemical behind the shop. Remediation costs for that site was over a million.
I seem to get a log of contaminated building site assignments.
Listen to some of the stories people tell about dumping their car oil in the sewer or back yards, I know of one sign company that dumped 45 gallon drums of toluene used as cleaning fluid at the bank of their site. Naden Navy base is polluted from all the heavy metals that have been dumped overboard.
I’m surprised none of the locals raised here don’t have three eyes and glow in the dark.
Thurston, t’s hard to tell because the current way we look at prices doesn’t take into account some of the subtle changes in the market. This is where AI would really come in helpful as it could make subjective calls on hundreds of variables quickly. As we might be having a change in buyer’s preferences and that would change the mix of the physical characteristic of properties that sold between two time periods. AI might be able to answer why our prices are more sticky in some types of properties or neighborhoods.
The answer for the downtown condo market , as it is the most homogenous area of our housing markets, is more clear. Lots of near identical sky boxes in size and age so that eliminates variations that obscure other markets where the properties vary considerably in age, condition, house and lot size from each other.
For example, the median price of a downtown condo over the last 30 days was $530,000. That bought a 2011 built condo of around 750 square feet. A year ago that median price was $555,000 which bought a 2008 built condo of some 750 square feet. So for downtown condos I would say the market has softened.
That would be a lot more difficult to determine for Oak Bay where there is a large variation among properties. Also other things might be going on in the downtown condo market that are not happening in other markets. As the downtown market is dominated by investors. Or an aging population of downtown youth that are coupling up and choosing to move to areas where the housing is more suitable for their needs. Or retirees that are considering the crime and constant downtown construction and are changing their preference on where to live. They may be choosing to spend their money in a smaller boutique condominium outside of the downtown core than a high rise with a harbor view.
So I would say the answer is …. it depends.
I’ve ranted about the new soil sample testing policy in the last couple of months….and we already see the policy in action today on Shelbourne infront of a new townhome development. Three people on site cutting/drilling/table set up for organizing samples……I can’t see this being less than 10k. Just added $1k/unit (or $10k for SFH) for absolutely no reason, but let’s continue to talk about “affordable housing.”
Good business opportunity for someone thought, not sure what sort of credentials you need for soil testing.
474 + 200 + 180 = 850ish for the month? Unless things slow down.
Whatever , are u seeing prices softening out there . Is this showing up in the stats
I’m also watching price decreases relative to cancelled/expired listings.
What we haven’t had yet is an increase in cancelled listings which may signal that home owners are frustrated in not getting their price and take their properties off the market.
Instead more home owners are choosing to decrease their asking price price.
Month to date market activity
Sales: 464 (down 2% compared to same time last year)
New lists: 1131 (up 34%)
Inventory: 3276 ( up 55%)
Good inflation numbers out today , nice to c inflation fizzling out
Okay, as long as it doesn’t edit my genetic code I’m cool with it.
I’ll take science over superstition, as will most people when they or someone close to them requires immunotherapy. Imagine how many lives could have been saved and misery avoided if we had had the Human papillomavirus vaccination sooner. And that’s what AI will be able to do by shortening the research time.
I don’t know man, that’s our genetic code. I really don’t think I want anyone editing my genetic code at this time.
That’s the god gene…You don’t want to fuck with the god gene.
Do you really want to open pandora’s box?
Max, you and I are not thinking on the same level for AI
https://youtu.be/JWrZgiKTxms?si=0FzHZXQDQWJ4jOyU
That ship has long since sailed. My buddy owns a very successful cabinet business here In town. He has two cnc machines spitting out kitchens every five minuets, and has been for over 20 years. If you want to look into AI, look to Germany. Don’t ask too many questions though, because they will make you look really stupid if you do.
It takes the thinking right out of the equation. There is no thinking. You throw a lift of 3/4″mdf in front of the machine and it sucks it in, the lasers analyze the sheet for absolute cost efficiency, then the robot cutter goes to town and spits it out the other end on to a conveyor heading to the automated spray booth.
The only thinking involved is the original onsite .cad file.
There are far more efficient ways of agricultural management than what we are currently practicing today.
Its all about appropriate land use moving forward.
perhaps of interest
https://www.telegraph.co.uk/money/property/mortgages/meet-yimby-armchair-warriors-fighting-get-homes-built/
We are nothing more than a parasite to this planet.
Corporate greed and the destruction of the planet are going on right now, right next door In northern Alberta.
But hey, those oil stocks are looking pretty good these days.
Humans are bad for the planet. Bottom line.
That’s what volcanoes are for…They will save us!
You are correct, the world is heavily over populated by a few billion. Have you ever looked into the georgia guidestones?
https://www.cnn.com/interactive/2024/02/us/georgia-guidestones-mystery-cec-cnnphotos/
World population in 1980 was 4.4 billion, it’s almost double that now. Land surface area has not increased, possibly even decreased slightly.
Investment property in AB? I’m not trying to piss you off. I just want to know.
I mean there’s gotta be money in it or it wouldn’t even be a thing.
My question to you is what is this thing?
If you are sucking money out of your house at 7% interest that money had better be going to good use.
IMO.
There are factors both ways making comparisons difficult.
—— Today, household formation is delayed (e.g. marriage and children come at 4 years later age), which means that houses are bought at later ages as well. This lowers the overall homeownership rate, but these people will own. Just at later ages. For example, 52% of millennials own homes, and that number will likely continue to rise, just at later ages than boomers did it.
today
—- household size is much smaller today (2.1 people per household, vs 2.5 in 1981) Household with fewer (or no) kids means less need for SFH today than yesteryear. A 2 person household today in a 1,000 sq ft condo (with pool, gym, storage, balcony, parking .) may have more room and amenities than a 1981 family of 3 in a 1,400 sq foot SFH.
If it will make you feel better Thurston. I expect prices to be higher in 25 years from now so buy now.
But if you want to make a truck load of money – maybe Victoria is not the right place. You might want to buy where the market is hot. Go buy a half dozen pre-construction condos in Calgary.
And keep in mind that houses comprised a greater % of individually owned units back then, because condos only started to get built in the 1970’s. That means that someone who owned then was more likely to own a house than someone who owns today. That’s another factor that makes a simple comparison of ownership rates less meaningful.
Patrick, not many in Gordon Head maybe one or two of the current listings,
More in Fairfield with about 17 of the current listings of condos and houses bought during Covid or about 25% of all listings.
View Royal has about 12 or about 18 percent of the listings bought during Covid
Why Fairfield and View Royal and not Gordon Head? Variability due to a small sample size.
Just jack , good to c your back , u can talk some sense into whatever
I agree, but…. Lots of people here would challenge your statement that “of course real estate prices will continue to go up”. Just look at the 2023 HHV year end predictions, and most HHVers were calling for 2023 prices to fall, some predicted falls by -20%.
Thanks .
Gordon Head.
(Alternates : View Royal, Fairfield)
Please elaborate? You pull out a heloc at 7% in BC and buy a house in AB. You still have to carry the 7% in BC, it doesn’t just disappear. I also don’t think people in Victoria could handle 40 below.
The money is going to Alberta these days. Re-finance the home and pull out the equity to buy property in Alberta.
I would agree with you there. All the low lying fruit has been picked.
I think real estate has run its course. It’s too expensive to get into the market and too expensive to hold.
I just need to find that one AI stock. I’ve been talking with a guy that sells AI about what he sells. It is so full of shit that it is bound to make people a fortune just as the dot com stocks did.
Which is exactly the same as real estate has done. There is nothing real about real estate anymore. It’s all sizzle and no steak.
Max , yep everything was on sale , same stocks and real estate look awfully cheap now . Maybe we there now again , start of another leg , exciting times
Dude, in 2008 I was about ready to sell everything and run to hills. I thought forsure the market was going to crash and we were all gonna die. I even stocked up on a years worth of canned food and water. Way too much Garth Turner…Nothing ever happened.
Patrick , you’ve stacked the deck . Of course real estate prices will continue to go up . But then the price of everything will go up a bunch in time . There will always be a group of people that will sit and wait for the crash that never comes . When I got here in 2014 , it was suppose to crash then too
This is exactly why I built a 500 sq/ft garden suite in my back yard. The Wife and I retire and move back there, its a really nice space. We surrender the 2600 sq/ft main house to our two kids. Its already divided into two suites. we will charge what we consider to be fair rent. They will both be subsidizing our retirement. When we die they can have it all.
Pick a neighborhood Patrick and I will see how many current listings are of homes bought during the pandemic.
I remember about 15 years ago a friend trying to get me to buy waterfront property here using the mantra “they’re not making any more coastline”. He failed with that line of argument but the thought occurs that if entrenched scarcity applies to any type of property near Victoria, it is SFHs.
Well that sucks to be them. Those were once in a life time emergency level interest rates and they are never coming back…Ever!
Maybe they can get a payday loan.
Whatever,
You have correctly prefaced your statement with “I think” which accurately characterizes what you’re saying as your prediction of what is to happen in the future – namely hard decisions probably leading to sales of the pandemic buyers. I happen to disagree with that prediction, but if it starts to happen, show me the data, and you’ll be right and I’ll be wrong!
Patrick, I think a lot of those that bought, during the pandemic, with jumbo mortgages would disagree with you. They have blended and extended themselves and are facing hard decisions. Most of them selling in today’s market will have lost a fair amount of their equity after they pay off their unsecured debts, such as credit cards and lines of credit, which they have used to keep themselves afloat.
For you it has been a path to riches, but for some it has been an Albatross around their neck.
I’ve been consistently telling HHVers here since 2018 that there never will be a better time than now to buy a SFH. And so far, I’ve been right.
There are many HHVers who told me I was wrong in 2018 and continue to do so. They’re still here waiting for the crash that never came.
They are free to listen to your opinions, and over time we will see who is right.
I think it may be an idea to look to a possible real estate recession and home owners on the edge should educate themselves on how to structure their debts and prepare for the worst. The worst isn’t as bad a you might think.
https://youtu.be/G5vVbOpUMWQ?si=txTrxIS66RtLvlP7
Patrick. here’s more information for you
“Over the past decade, home prices have surged out of reach of a growing majority of Canadians. Home ownership rates have begun a historic decline as housing investors bid up and buy out a fast-growing share of the country’s condo apartments and houses. Crowded out of homeownership, upper income residents are being flooded into a tight rental system where lower income communities face declining affordability and security of tenure. Meanwhile, institutional investors and large corporate landlords are on a “buying spree,” acquiring a rising share of Canada’s aging purpose-built rental stock, often to ‘reposition’ them, i.e. displace their lower-income tenants (August et al, 2023: 8; August, 2020).
Ownership of housing is becoming increasingly concentrated in the hands of wealthy Canadians, fostering a worsening status quo for everyone else.”
I expect you will be working all day today to furiously search google to try to refute my facts, lol
Patrick, I’m not sure why you feel it necessary to continue to write such missleading statement. For one thing the population of Canada was much younger in 1982 so the boomers who were in their late teens to early 30’s of course owned less homes than the population of Canada today that is much older, in fact the average Canadian in 1982 was 31 and in 2021 the average Canadian was 10 years older at age 41.
Here’s another fact im sure you must be aware of. According to Statistics Canada, the national homeownership rate dropped from 69% in 2011 to 66.5% in 2021, oh and of those who own might now be living in a 500 sq/ft condo vs more then likely owning a single family home in 1981.
Quit telling younger people to suck it and it’s never been a better time to buy, it’s seniors like you who had it much easier than young people today.
Keep in mind in the early 80s people were worrying about they’re job more than real estate . That recession was all about employment
I have paid 15%. And they released the funds in performance draws. You didn’t get your final draw until occupancy. You had to get shit done quick. I was very transparent with my subtrades. Get it built and get it sold.
Yes, that’s true.
Also worth pointing out that today’s home ownership rate in Canada (67%) is higher than the 1980s (62%).
So whatever the combination of luck vs skill, it all adds up to a higher % of people today owning their homes than the 1980s. Great!
Meanwhile, boomers can be proud that the Canada homeownership rate rose from 62% to 67% “on their watch”
And if in thirty years from now, homeownership has further risen to 72%, I expect the (aging) Millennials will be proud of that too.
Yeah right, in 1989 rates were 12.25% at RBC for preferred customers. Better than 18% but still extremely high.
That was only around the peak in 1981-82, before the bust. Don’t get the idea the whole decade was like that. Things changed radically in a couple of years.
https://www.ratehub.ca/5-year-fixed-mortgage-rate-history
I didn’t get “killed”. One thing to keep in mind, that many don’t, is that if house prices are a smaller multiple of incomes then with the same rate of saving you can put up a larger down payment relative to the house price. This gives you a bigger reduction in payments.
Real life examples: a friend of mind bought a SFH in West Point Grey in 1984 for $150K. At the same time you could buy a SFH in the east side of the City of Vancouver for well under $100K. Look up mortgage rates and incomes and see what you get. And one more time – keep in mind the secular decline in rates over the life of the mortgage.
I was there, I bought with one income and my own savings, and don’t tell me it was almost as hard back then. That’s just nonsense.
Most people have hardship in their lives.
Some rise above it, others wallow in it.
Success or failure is largely a matter of choice, not luck.
As Mark Twain said: All a man needs is luck and I find the harder I work the luckier I am.
I don’t know your circumstances. I read your post again and now I feel like an asshole.
I sincerely apologize If I offended you…But you started it.
Again, I’m sorry.
https://youtu.be/9PSbgxtOeZo?si=QQ5IFd_6d4yXjI-G
Do you honestly think that you are the only one that worked very hard to get where they are?
WTF are you talking about? My Wife is a very liberated woman and I totally respect that. And shes very good at math.
I totally appreciate the fact that the food bank is there for people in need.
There is nothing wrong with partying…Just don’t fly off the handle.
So are you going to dwell on “If you were”?
If you want to throw shit at me that’s fine. I’m a big boy.
Bring it.
I wish there was a downvote so I could downvote max’s last (most recent) post.
It’s both everyone – luck and skill. It’s rarely exclusively one or the other. Yes I worked very hard to get where I am. I went to a rich undergrad even though I came from a not rich family (got in as a woman in math – but changed majors). I was very poor in undergrad and had to use the food bank. For our trip to Europe we saved for 2 years and while our peers were ordering take out and partying we were saving. Worth the sacrifice. Still if I was in a chair or was born with less intelligence or didn’t meet certain people at certain times who knows where I’d be. Luck and skill – both almost all the time.
Yeah kinda. But I was thinking more about something like this…
https://youtu.be/58vruXLDpL0?si=tg_Ris5v41AdIiY5
Can you do that? That would be an excellent feature.
Even just strippers. Now you have my wheels turning.
Is it a floating brothel?
The red tape is beyond stupid. I am so ready to throw in the towel. For now I’m just going to keep doing what I do because I get paid very well for doing it. But I have capital at work right now and the roi is looking pretty good, and I’m not even there to completely oversee it yet.
I’ll even give you a hint. It involves tourism and the ocean surrounding our Island.
.
Our government’s efforts to disincentivize go-getters by putting up roadblocks to success (such as taxing profits to the point that it no longer makes sense to incur risk) eventually affects the whole country. Look at any communist country with corrupt leaders, and you can easily see what a low quality of life the citizens must endure. The government should get out of the way of the people that can build the economy and improve everyone’s life. I doubt the new capital gains tax will have any impact on the lives of the less fortunate.
It cost $25k to put my Father inlaw in the ground.
They give you a list and tell you to check off what you don’t want. The list is very long.
Here’s a sign people might be getting tight on cash.
https://www.reuters.com/world/americas/canada-bodies-go-unclaimed-costs-put-funerals-out-reach-2024-05-18/
Another thing I would like to add to this affordably issue. My Father was a general contractor back in the early 80’s. He spent the better part of two decades building out low income housing, co-op housing, first nations housing, senior housing, social housing. These were all 24-40 unit complexes and they were going up all over town for 20 years…Until the budget cuts came in.
Affordability has always been an issue in Victoria. This is nothing new.
Dee, likely even the down payment wasn’t about luck. Your parents / in-laws saw the merit in helping you and your partner. If you weren’t already on the right path they likely would not have done so.
It’s the “luck” mantra that is currently driving a huge divide between our generations and various levels of government are stirring it.
While I feel fortunate to be where we are it was not luck: as a family of four we lived in a 700’ basement suite for over a decade, we made the effort to change our future by going back to school as adults, bettered ourselves through higher employment, and doing without a lot of things to make it happen.
You’re right, we are fortunate to live where we do to have these opportunities, but it still takes effort and sacrifice.
Be proud of your accomplishments.
Sorry that’s wrong.
Its like this…
If you are running the mozzila firefox browser and have the ad block pro plugin installed, and want to quote someone or something on this blog, you need to enter the entire tag, otherwise the script will collide.
Just like pictured below…
☮
The cavemen had it far worse than we do. And they didn’t even have to worry about money. We actually have it pretty good.
I think being born able bodied and healthy in Canada is pretty darn lucky. Take those things away and life looks much different.
And yes, there are those who intense sacrifice manage to change what otherwise seems to be a pretty bleak fate. However, I think the point is that it shouldn’t take that kind of effort to have a decent life. Have you ever seen the Will Smith movie The Pursuit of Happiness? Very few people have the combination of intelligence, drive and other characteristics that enabled that man to overcome what he did. We, as a society, should not require or expect that either.
Some people need luck, others make sacrifices (like not traveling around the world) to create their own “luck”.
Private lenders can really help you get your foot in the door. No cmhc insurance, stress test bullshit. I didn’t approach the bank until I knew this was where I wanted to live forever. They lend you the money using a lawyer to draw it all up. They have first position of the asset. You pay them a premium interest (but you can live there) until you sell it or pay them out.
Its akin to paying rent.
But Max I needed the luck to have the option in the first place. Like it was very lucky that my partner parents helped us with the down payment for our first place.
But yes it’s also an action that I took to move forward and buy. Because, at the time of buying our first place in 2014 there were people speculating that the market might go down. So we had people in our lives injecting that doubt. We plowed ahead anyway and I’m so glad that we did.
But again, without luck of being given a down payment we couldn’t have exercised that option in the first place.
So it’s both – like many things – luck and some skill I guess.
So was I.
Without doing it, you would have never had found that luck.
We love renting but are growing slightly concerned by financial troubles of our landlord. Note we’re paying close to market rent. They are sitting on a lot of house equity though. I’m not sure they’d be up for reversing arrangement where we completely buy them out, but was wondering about house conversion. We are zoned R2 with lots of duplexes around us. We would just have the house appraised, do the conversion renovations and then pay them market value. I’m guessing we would have to foot bill for renos and maybe take part out of final bill. Anyone been involved with one of these? Is this a crazy idea?
I remember my dad saying rates were up to 18% in the 80’s. It’s really hard to believe that now. Still, I think it’s clear that houses are less affordable now. I mean, for example, both of my parents were able to buy houses with incomes from very middle class (non-professional) jobs. That’s basically impossible for average people these days.
That being said, I truly don’t understand why some young people who can afford to buy wait and wait and wait. I was told “buy what you can as soon as you can.” That really worked out well for us. When we moved to Victoria I was personally willing to live in a 2 bed condo as a family of four but instead we ended up getting an outdated townhouse that needed a lot of work. It was 3 small bedrooms, 1 bathroom, and just over 1,000 sqft. But, now I sound like an old person bragging about my current situation thinking it is all skill when in reality I have to be honest and acknowledge that so much of it was luck.
Affordable houses have just changed. Now they’re joined together, super small, or ready to fall down. Houses have never really been affordable. But they get affordable the longer you live in them.
Re: houses were cheaper in the 1980s?
Yes, cheaper back in the 1980’s, but much less so when you consider higher interest rate mortgage payments.
Consider (hypothetical) two identical houses, but if you buy them you need to signup for different mortgages, at fixed rates, covering 100% of the cost of the house. And you’re stuck with the mortgage, no refinancing or selling etc.
House “A” is $500,000 but you need to take a 13% mortgage rate for 25 years term.
house “B” is $1,000,000, requiring 4.7% mortgage rate for 25 years term.
The answer is you’d end up paying about the same mortgage payment on both houses, so end up paying the same amount total over the 25 years.
The point being… yes, houses were cheaper in the 1980’s but you got killed with interest payments. So if comparing the prices then with today, factor in all the extra interest paid back then, and the difference becomes much less. And of course the 3.7X inflation from 1980 to today.
And here’s a chart of mortgage interest rates, showing that posted mortgage rates were above 10% for 20 years straight (1973 to 1993).
Once the interest rate peak and bust of the early 80’s were past affordability was much better than it is today – even with rates still in the double digits. And once you bought you were into a secular rate decline that made your housing costs even lower.
But yes some buying near the price peak, or with mortgages renewing near the rate peak, did get into trouble.
This was in 1998. The $225k mortgage I was carrying @ 7.5% was through a private lender and was interest only payments. The banks wouldn’t touch me, I was way too young. I was just happy to have the house. I just looked at it as paying rent. Price acceleration started taking off, we approached the bank, got approved for a 25 year term, paid off the loan shark. Here we are today…In the same house.
My dad still talks about the mortgage rates in the 80s. Those were painful times for many.
Yes they are. When I was 20 my income level would only afford a 225k house. If you have any meat between your ears you can expect that income level would rise along with the house prices… Its all relative.
When I bought this house I was making $19 per/hr carrying a $225k mortgage @ 7.5%.
All of my income went to the mortgage. My wife, with her income put the food on the table.
Now, I am sure you and yours are making a hell of a lot more money than that.
https://househuntvictoria.ca/2024/05/13/towards-a-better-measure-of-market-balance/#comment-115575
Thanks, Leo. Do you have a background in economics history?
Not compared to house prices, they aren’t.
Does anyone here know if you need to setup a GST number for a vacation rental in your primary residence like you had to when you rented a standalone STR or does that revenue just get added to your income the same as renting it long term?
When I was 17, I entered my four apprenticeship in the trade of carpentry. This was a mix of onsite training and camosun college technical training. The onsite training showed you how to get shit done efficiently. The camosun college training showed you the arithmetic, science, and terminology.
Once you have completed the four years of prescribed training as a registered apprentice you are given the option to challenge the Inter provincial examination. This gives you red seal certification and is recognized throughout the country. Now I don’t know who created the questions for this examination…But they obviously don’t know their head from their asshole when it comes to the trade of carpentry.
If you passed this examination it would have been a complete fluke even after the four years of prescribed training. Cheat sheets started circulating around campus for $25. It was a list of 1000 possible questions with the answers…They rotate the questions. I bought one, I studied it, and I passed. The dude that created this new “builders examination” is probably the same dude that created the Inter Provincial examination way back in 1995.
Infact it’s probably the exact same examination…Regurgitated.
Ummm…
We have a similar problem in my industry where the policy department keeps growing and basically telling us actually doing the work how to do the work. Some of the rules they come up with actually make no sense and not a person who actually does the work would think it makes sense or is a good idea. That’s partly why I got involved heavily with the union. I can write opinions on impacts all day long … it is a real concern. Luckily where I work we’ve been successful in bouncing the stupidest ideas. Too bad so much energy is required to do this kind of work.
Sorry, not sure how the legend got cut off. Fixed.
Not easily. All inventory series only goes to 1996. I do have inventory back to 1989 but I’m a little unsure about the data quality there as there is some weird swings in there. New lists go back to 1990. I have written about the 80s before though through trolling through some paper records to fill in the gaps. https://househuntvictoria.ca/2022/05/16/new-and-active-listings-what-happened-during-the-crash-of-81/
Incomes are up a lot in the last 20 years, but a good chunk of that is due to increased income inequality (average is up a lot more than the median)
Ahh, an alternative perspective that you don’t agree with is a “rant”. That really doesn’t demonstrate that you have any valid points to present. You likely haven’t dealt enough of the “ability based” government staff that are working on a “fake it til’ they make it” in technical jobs that should have been skill and experience selections.
Supply can easily increase if there is the will to do so.
Well, I would only be lying to you if I told you I hadn’t paid a visit to monty’s, the red lion, the sherwood, the gorge, etc…
Yes. I saw your rant as blaming government on all things housing. Including housing approvals… “ummreally: “ take longer through meaningless regulations and steps that interfere with what should be straight forward things… across the levels of government making housing policy and regulations“
Really, changing topic to number built? I thought you were talking about affordable? Nice use of the “substitution of concepts” fallacy.
That rant is DOA, since we’ve seen at/near record high number of housing starts in 2023 in Victoria, Vancouver and BC. I say congrats and thank you to both everyone in government housing and the developers that worked hard to make those record approvals happen.
Thanks for the pronoun tip.
Yep, that’s the thinking that creates the failure right there, and that ends up making everything thing cost more and take longer through meaningless regulations and steps that interfere with what should be straight forward things. Take that thinking from the home builders exam requirement, multiply hundreds and thousands of times across the levels of government making housing policy and regulations and voila, you have “why housing will never be affordable”. That’s the problem with having people that actually have never done things creating the rules, they base things on “in theory it should work”, but since they have never worked, it won’t.
Nevermind.
Max – not sure what your point is. Like I said, owner builders do not need tickets for typical residential work. That was my experience building in the CoV a few years ago. As far as I know, there is nothing you can’t do as a homeowner, as long as it falls within the scope of typical residential construction.
Without a ticket, you can expect on-site visits from the inspectors where the pros get to just take pics (for electrical, at least). When it comes to cost, I definitely paid more for materials (although not that much more), but my cost of labour was just my time.
And there we have it. Most owner builders grumble, but write the test and pass it. And then are free to build their house, negating your unsupported argument that this builder exam is somehow the reason “ why housing will never be affordable”.
As for the unsupported assertion that the exam is leading to fewer housing starts, BC housing starts have more than tripled in last 15 years, to a record high.
Thanks for the discussion.
Call CoV and tell them you want to do a 200 amp panel upgrade but you don’t have a license.
Because it is super involved now. Spray foam required in areas without cross flow (not spray cans). All insulation is directly tied to the building envelope (rain screen) to create an exterior unit. All windows/doors are rod and caulked. And they can do it for far cheaper than you could possibly buy the material due to their volume buying, experience, and dealings with municipal inspectors on a daily basis.
Exterior walls have become a science…That’s why.
Such wouldn’t require an entire department of people to monitor/administer.
Of the thousands of study guides I’ve emailed out over the years no one person has every noted the exam was useful in any way whatsoever. Most people just email me back with “I passed, thanks for getting me through this BS.”
If you know how to build a house like Sidekick, the exam is useless. If you don’t know how to build a house and you will just be lining up various contractors, the exam is useless.
The problem with the exam is it is a reflection of everything government/housing related. We have something that is completely useless, helps no one, increases costs (you have to pay to write the exam) and delays housing starts, and it hasn’t be scrapped.
and not one document has been released in 8 years in terms of how it has helped in any shape way or form other than decreasing owner-builder starts by 70%+.
It employees an entire department of people and that is the important thing. Somehow we have enough resources to employ a department to work on something useless, but we don’t have enough doctors and nurses.
https://www.victoria.ca/media/file/homeowner-electrical-permit-application-formpdf
Why?
For starters that is complete bullshit. You need to be a licensed electrician to even pull a permit. I would say if you were to even insulate your own house you would fail the inspection. Do you know what a vapour box is?
Sidekick. Congrats . I wish I had those skills. Several of my family members are in the category, but not me. And if I was skilled like that. I’d be grumbling about having to take the “useless” builder exam too 🙂
Max , in the 80s we would be having lunch watching peelers and the next table would be muni workers or an inspector. We would all be at the same pub never asked for any favours but the city would be easy to deal with and they would be super helpful . Those days are behind us
Thurston, there’s your answer. sidekick describes what you’re saying doesn’t exist. The do-it-yourself builder.
sidekick: “ There are a lot fewer restrictions on ‘owner builders’ – ie – we’re allowed to do pretty much all the work without holding any tickets. If you’re competent, building a house can be super rewarding.”
They were a few years ago. I really enjoyed all the CoV inspectors (except one).
This is me.
Most definitely is, but it’s not for the faint of heart.
Patrick, the exam is useless. I believe the goal is to ‘even the field’ with professional builders by requiring 2-5-10 warranties. That alone should be enough to deter ‘owner builders’ who are building to flip. If you’re building for yourself/family, then just add legislation that you can’t sell within 5 years.
There are a lot fewer restrictions on ‘owner builders’ – ie – we’re allowed to do pretty much all the work without holding any tickets. If you’re competent, building a house can be super rewarding.
They’re not like that anymore. Framer calls for inspection and deals with it, plumber calls for inspection and deals with. The subtrades deal with the inspector. If you were to deal with the inspector you would more than likely fail the inspection.
Patrick , nope . I’ve only worked inner city Vancouver , Calgary and Victoria . Just couldn’t c why some one would think that’s even possible today on so many levels
Thurston, have you never encountered the do it yourself builder, that is hands-on and wants to do as much as possible himself, maybe with the help of few brothers or friends? And just uses trades sparingly. I’ve seen lots of that, especially on the Islands. Friendly building inspector shows up at the end and doesn’t ask too many questions.
Some of the time – yes – especially in cities where all the trades/sub trades are available, and the builder has a good budget.
But there’s hundreds of projects all over BC, and there’s going to be all kinds of owner builders – some will be a lot more hands-on owner builders than you’re describing. This could be building a second home in the boonies somewhere. I’ve got family members that did most of that themselves, and only got trades for the tricky parts. Another couple of friends built most of their log home themselves. They weren’t just signing cheques on Fridays.
Patrick , is that some of the stuff that’s up on the exam site .
All sub trades carry their own work safe coverage, and I verify that.
Yeah, that’s how it goes. I still have to be nice to the owners though.
These are just some of the reponsibiiities for the owner builder.
Planning and project management
* Spotting potential issues in plans
* BC Building Code
* Jobsite and Labour Safety
* Problem solving and communication
* Mitigating material and labour costs
* Getting the right permits and inspections
* Managing employees and subcontractors
* Ordering the right materials
* Tracking and managing accounts
Just look at one of them “Job Site And Labour Safety”
Why would it be useless to insist that a builder have at least some training in “Job Site and Labour Safety”?
I could see arguing that it should be more than just studying for this exam, but you’re arguing the opposite – they shouldn’t have to study anything or write any exam!
Soooo , can we agree that the owner / builder , or the other names we use use , such as GC or site soup are one and the same . They don’t usually follow sub trades around with a measuring tape or dictate code to them . They also don’t usually join a framing crew or other trade and be a bro . In fact I have been on jobs where owner / builder wants to help and I would rather they fuk off and just make sure we are paid
Yes, you need to know your shit, but you ain’t gonna find it in that exam.
That’s not how it works. You compile a job cost summary by attaining multiple quotes and you hire the subcontractors to build your house. They deal with the engineer, municipal inspector, whatever. They are subtrades. They are not builders or managers…That is on you.
No one said that. But there won’t be a builder, construction manager or project manager hired or on site, because that is you as owner builder.
Seems reasonable that someone with all those functions needs to demonstrate at least some knowledge enough to pass a basic exam.
Yea, pass the exam and the muncipality says “don’t worry about the structural engineer design and p.engineer onsite inspections.” 🙂
Nice , so pass the exam and there will be not one ticketed trade on site . So not only do u have to pass the test but u have to be a ticketed plumber , electrician and red seal framer etc , sweet
Well that’s a reason that the exam isn’t useless. Forces studying and challenging the exam. Important, since the builder functions as construction , project manager and builder.
Thank god for the mute button 🙂 I guess some people are naive enough to think you, as the home owner, will be advising the framer with 20 years experience, the structural engineer, and the city inspector, on nailing patterns because you had one question about nailing patterns on an exam.
It’s like a lot of people have never stepped out into the real world.
If you went through the effort of studying and challenging the exam. Why would you even need a builder/manager?
That’s not what the Act says. It says you “must build or directly manage the construction of your new home
yourself.” And you and the people you builder/managers you hired can be fined and prosecuted.
https://www.bchousing.org/sites/default/files/media/documents/Owner-Builder-FAQs.pdf
“ As an owner builder, you must build or directly manage the construction of your new home
yourself. If you engage a builder, construction manager, project manager or any third-party
to perform these functions, both you and the hired construction manager or builder are
committing an offence under the Act. You could face monetary penalties of up to $25,000,
prosecution or both.”
Your presence alone is enough to run a job. Periodic spot checks keep them on their toes.
You can even do this remotely by phoning someone you know is on site and asking them if whoever else you want to be there is actually there.
Patrick , sorry man useless crap u don’t need and won’t be of any use when building a house . Owner / builder is just there to write checks on Friday , and that’s it . Houses are built by sub trades and they’re work passing inspection is the only thing that matters
I nice number of SFD listings coming on market the last couple of days.
… and then there are many other sources, where people offer sample BC owner builder questions that aren’t “useless” topics at all. (The partial preview here is just the question and answer, not the multiple choice answers shown in the paid for version – and it costs all of $12, )
https://www.stuvia.com/en-us/doc/2790438/bc-owner-builder-exam-2023-questions-and-answers-100-verified
This whole licensing thing Is just a money grab. If a guy wants to build his own house he should atleast be allowed to manage it. He is the one that is paying the bills after all. Just make it so they can’t pick up a hammer and build anything.
Beyond useless, 30 out of the 100 questions are on the act and the other 70 are not much better
What is the purpose of the Owner Builder Disclosure Notice?
a. If sold within 5 years of occupancy, lets buyer know that it is built by an “Owner Builder”
b. If sold within 10 years of occupancy, lets buyer have an option for additional warranty
c. If sold within 10 years of occupancy, the prospective buyer must be informed that this is a “owner builder” and there is no warranty
d. No notice is required after initial occupancy
How many years on leased land to get accepted for owner builder authorization?
a. 10 years
b. 12 years
c. 20 years
d. 15 years
What is the minimum height of a deck rail more than 600 mm but less than 1080 mm from the ground level?
a. 24 inches
b. 36 inches
c. 40 inches
d. 42 inches
^Yup, that is an actual question. Question in mm an answers in inches.
The entire exam is such a complete joke. Are houses falling apart in the other provinces? (BC is only province to require this exam).
Fine, I will dot my “i’s” moving forward. The Government capitalizes every letter in my name when they send me a bill.
Just the pronoun “I” needs to be capitalized, not every word beginning with the letter “i”.
I agree with marko , that the exam is useless . Would be much better to have an accounting exam as it’s more relevant to anyone building their own home .
Great idea! “Family Doctors – rent free!”
The owner-builder exam stories you’re telling us about are mostly from the big numbers of people asking for your study guide and therefore planning to write the exam. So they’re not scared away leading to less SFH starts as you assert.
Pass rate on first exam attempt is high (76%) and if they fail, there’s a more in depth video course that boasts an “over 99%” pass rate (see pic).
Sorry, but lots of things in life require some education, and proof of basic knowledge, and building a house is one of them. Doubly so when the owner is rebuilding because their last house was destroyed, as there may be something to learn to prevent (or reduce) the same thing happening with the new house.
I don’t see why someone would do this without having some concrete reason to relocate somewhere else. That’s for owner-occupiers of course, investors could just be wiling to get out at the right price.
Good luck getting into government LTC. It’s like trying to get a doctor.
Thanks for the numbers Marko. I doubt the ratio shown will change anytime soon. On one hand I feel it’s kind of sad that the dream of the detached home is getting out of reach of so many but on the other hand as cities grow this is just a natural part of the life cycle.
I think I’d be a lot more excited about it if there was better public transit.
What kind of sellers are you seeing these days Marko? Are the majority actually trying to sell or is it more “why don’t I put it on the market and if there’s an amazing offer I’ll sell” kind of people?
Private senior care homes in Victoria are roughly from $6k+ for private Independent Living to $12-20k+ in private LTC. Gov LTC maxes around $3k and the experience is usually equal to or better than private LTC. That is not an endorsement, there are many shortcomings in both gov and private.
Cost of private home care generally ranges from $3k+ for 2h daily to $20k+ for 24h care. The Gov home care often pushes people to use private because it’s better but that’s often not the case. Sometimes private home care is better but for many people Gov home care is still the best or only option.
If you ever make it into your 80s and need help you most likely won’t want to be subject to a revolving door of students with little practical experience. Most people are happier and healthier in the home setting but home care is not the best option for everyone through end of life. It has become more difficult to have someone deemed incapable in recent years which is pushing more seniors to stay in their homes longer.
Senior personnel care homes are extremely expensive and the monthly fees have no controls as other services are included. They can charge whatever they want. I don’t think it is that easy to get reasonable refinancing and reverse mortgages are probably a ripoff. If I ever make it into my 80’s and need help, my plan is to rent rooms at very reasonable rates to nursing students. They can practice on me.
I made a YT video a couple of months ago noting if my end goal was to own a SFH I would buy sooner than later. SFH starts are down huge over the last 20 years. Owner-builder starts have gone from close to 3,000 to less than 1,000 per year. The government bureaucracy is suffocating. Now with builder’s licences being a challenge a ton of communities have no access to a builder within 100-200km, but if the owner wants to rebuild after a forest fire or similar, they need to write the exam. Just complete non-sense.
Housing starts are hanging in there only because rental apartment construciton is through the roof so if you look at those numbers you would be fooled thinking into everything is fine.
I bet if you ran the numbers we are actually building less livable square footage than 20 years ago.
In 2003 in BC we built 15,041 SFHs and 18,881 multi-units
In 2023 in BC we built 6,847 SFHs and 39,108 multi-units (and I am guessing those multi-units are a lot smaller in size than those from 2003).
Frank , it has made more sense to hold on to the property and just borrow against it . Pretty much everyone I know that have sold and banked the money are poorer for it . Hold and leverage
Many of the owners of multi-million dollar homes bought them decades ago for a fraction of today’s current value. They are now living off their pensions and RRSP savings so their taxable income is not that high. One would wonder why they don’t cash out and enjoy their windfall. People are funny, they feel comfortable where they are and don’t want to move. Maybe they plan to leave the property to their children, if they’re not living there already.
CRA uncovers $1.3 billion in unpaid taxes in B.C. real estate sector
https://vancouversun.com/news/local-news/cra-uncovers-1-3-billion-in-unpaid-taxes-in-b-c-real-estate-sector
Thanks @Barrister
@SaanichAdam I doubt the “spike” that will happen if interest rates drop will make a realistic long term difference. Small changes shouldn’t effect long term market trends. A rate drop would cause housing prices to jump but the more important metric to watch would be debt servicing costs. Also the more we lower interest rates the more inflation will rise. The FOMO is very hard to predict. When it comes to investments when people start doing actions because of FOMO it is usually the wrong time and after the most profitable time has passed. To paraphrase these would be people that generally buy on the high or people trying to time the market. This is rarely a successful strategy. When the first rate cut happens how many of those people waiting on the rate cut will just keep on waiting for more rate cuts. Another important fact is that even if they have FOMO people are already maxing their budget or close to it to buy in Victoria.
To your other point of SFH that is more interesting. It’s a long story but I’m living in Germany for a bit currently due to my partner being from there and it has been really interesting to see the housing here. Housing in general is more affordable here but SFH are not. They are a scarce commodity in may locations. Currently in Canada SFH are protected and even encouraged in areas where they honestly shouldn’t be due to zoning. As zoning gets relaxed with time in Victoria the true value of land will continue to be realised. This will encourage a greater number of condos/apartments being built as opposed to SFHs. We can already see this happening in housing completions. To summarise as the supply of SFH decreases, their prices will continue to go up and as zoning relaxes the value of SFH zoned land (especially in central locations) will also go up. MF units should have their price decrease as a ratio to SFH as their supply stops being artificially contained. Land value is high and the supply cannot increase meaning it will continue to rise.
@ironcondo Agreed to a large part. Wealth has become more important than income. Funnily enough inflation and housing/stock crashes help lower the power of wealth.
Thanks @Max
@Donald That is a symptom of so much of our economy relying on construction, specifically residential construction. Infrastructure construction is generally a great investment as the ROI is high. If they relax regulations I would hope it is for projects that bring in money to Canada. Mining, pipelines, manufacturing, and investment in workers are great for the economy. Honestly if foreign students weren’t putting so much stress on housing, foreign students coming here to study is a great export. A sense of urgency isn’t necessarily a bad thing but short term fixes at the expense of long term growth is what got us here in the first place.
or It
Because I save all my dots for In between my sentences.
How do you do that? Being the most desirable place In the country to live.
Why are you capitalizing “it”?
Great analysis @MunEng, I agree that inflating away home prices is an easier sell for people than seeing prices drop in nominal terms. I feel like this is a core problem of why we go through boom/bust cycles. We cool the economy, it slows, and then we feel like it’s running too slow and remove rules in place to keep it cool in the first place. The Glass-Steagall act repeal in the US comes to mind during the Clinton administration, Bush’s ownership society policies … and so on.
I’m curious as a society whether we can control our desire to “make up ground” for cooling periods and decide that growth should be slow and steady for the long-term.
Very well written dude.
Those that have been In the game for a considerable amount of time understand the game can change very rapidly. No one can time It, no one can gauge It, no one really knows shit about anything…But they are always prepared for that black swan. That’s just experience… They know It can happen, they have seen It before…And they expect that It could happen again at any given time!
You really have to experience It In real life to truly understand a downturn. Its not really something you can read from a book.
What you can do Is allow for one… So you are not completely wiped out when one does come along.
I wouldn’t be surprised at all If Interests rates were to Increase.
Just do what everyone else Is doing. It might work out for you…Maybe.
Its nothing more than an infinite loop of no one knows anything at all. If they say they do. They are full of shit…IMO.
∞
Tell me about It…I live In one!
Don’t even get me started. I could tell you a thing or two about how a municipality can stop shit.
Didn’t have time to really dive into the alternate measure of MOI, but looks something like this. Certainly the 6 adjMOI is more reflective of current market conditions, but would have to look more into whether the correlation improves or not. Feels like it may better reflect slowing markets, but doesn’t reflect heating markets, so woudl still need to look at SNLR
Mungeng that was a great post. I think that a lot of people think that housing prices should just go sideways for a while and let wages catch up. The issue is that wages are becoming more divided. as we import cheap labour for the corps, and as prices of everything rise, the middle gets left behind or divided between the top and the bottom. Its very different worlds for thoese that purchased say mid 2010s compared to post 2020. It was the best of times it was the worste of times a tale of two cities.
https://youtu.be/Bm6yYvKbPt4?si=Z9ZzPJ2WbSVyhdqa
It’s simply nonsense to assert that this builder-exam requirement has become the reason “why housing will never be affordable”
A simple glance at BC housing starts shows construction starts at record high levels. Up dramatically since the introduction of the owner-builder exam. A record 50,490 starts in BC last year! Likely only a handful of DIY builders cancelled their projects because they couldn’t wait 1-2 months to write the exam.
Multiple owner builder emails rolling in every day….why housing will never be affordable. There is sooo much non-sense that will never go away and will only get worse.
“I just watched your video on the BC Housing owner builder exam. I couldn’t agree with you more. I have submitted my application last week and now have to wait a month or 2 for a response on when I can take the exam. It’s just another tax.
If you have any information on the exam and the questions please send me a copy. I have built my own home prior to the exam regulations without any issue. The delay in taking the exam could cost me 6 additional months for completion because I’m building in the interior of BC. It might be hard to build in -20 weather.
Thanks for your help”
Well, no matter the rules that come from above, municipalities can still find a way to stop things.
https://www.viewroyal.ca/assets/Town~Hall/Agendas-Minutes/2024/2024%2005%2017%20SCOHL%20Agenda.pdf
Multiplex is limited in FAR to same size as the current SFHs.
@MunEng – well written piece and a position that I think accounts for a more nuanced look at how humans work. I think you might be right – the longer Tiff can keep up this “lower interest rates are coming” narrative, the more inflation and wage growth normalizes today’s prices. The outcome is not far off what I and others (Leo) think might happen over the next few years which is that prices stay stable or rise very little (inflation or less) and after a few years we’ve got somewhat better affordability, coupled with slowly falling interest rates.
What we have a hard time accounting for is the FOMO that might happen when Tiff does his first .25% drop – will we get all frothy at the mouth and screw it up again? I hope not. SFH and even decent townhomes are so fundamentally expensive to the average household hopefully good sense will prevail.
Oh yeah I’ve lived up this way a long time already. We have three kids and describe ourselves as economic migrants. We used to rent in Langford 10 years ago, and kept moving north as things got so expensive. Langford to Mill Bay to now, Sahtlam. Sahtlam is nice because we are a few minutes from the core of Duncan which I prefer, but overall the whole valley is pretty nice. I work in Vic and would much rather work there as the commute hasn’t stolen my heart after all of these years.
MunEng: That was an exceptionally thoughtful piece. thank you.
Look I maybe wrong about this and haven’t done the adequate in depth research for this but my personal theory is a better way to think about hidden cost of housing is not the actual total cost of the house but the debt servicing cost and rent.
For example one of the big reasons housing prices don’t immediately react to interest rate changes is that people expect the interest rates to go back to what they think the normal is. When interest rates dropped heavily after 2008 and we had a decade of rock bottom interest rates people expected in the beginning it wouldn’t last. I remember my parents and their friends being so happy to lock in these rates and never expecting it to last for so long. They would never have paid crazy amounts for housing even if they could have afforded it because they would be too worried about interest rates rising back to “normal”. In the years before and especially during the pandemic almost no one was factoring in rising interest rate risk for low interest rates were the new “normal”.
Now when people are looking to buy houses (including me) they are more than willing to go to the absolute max of what they can get approved for (partly because otherwise no one can afford to buy) because people expect rates to eventually fall causing their debt servicing cost to fall. Does anyone actually know anyone that is planning for the risk of growing interest? I certainly do not.
Now lets go to the Central Bank. The most important goal of the Central Bank of Canada is to provide financial stability/predictability. There is a HUGE cost if this doesn’t happen which I feel many Canadians don’t truly appreciate. Argentina used to be richer than Canada at the turn of the 20th century. They have social stability, an educated population, and are rich in natural resources but a history of monetary instability has really screwed them over. Their are several other countries that can be used as examples, I used Argentina because of its similarity to Canada.
Tiff Macklem and his team are some of the smartest people around. They are more than aware of the importance of stability. I mean it’s even in their mandate. Now during the pandemic with the rock bottom interest rates, the expectation of rock bottom interest rates in the future, people spending less (home office, less opportunities to spend money on vacations and services), high employment rates/CERB, population growth, and even expectations of the rate of population growth continuing to grow, housing prices exploded. All of these factors have changed significantly. I can expand on these but this post is already getting pretty long.
One of the biggest changes in macroeconomics in the last 50 years is a large growth in awareness of human behaviour and psychology when enacting policy. People are not rational beings.
Now Tiff Macklem looks at the state of the Canadian economy and identifies the greatest threats to stability. He sees that productivity is falling and Canadian housing prices are inflated given how many factors have changed. If housing prices fall too rapidly their prized stability goes to hell. If the equity of the house falls below the debt owed their will be instability. In 2008 in the US only 1.8% of housing units were foreclosed. It doesn’t take a lot to start the panic.
Now here is where I get into what I don’t even know how to go about proving or disproving it. What would Tiff Macklem do to stop the bubble from bursting but also take the danger out of these high housing prices. A better way to look at this is what can Tiff Macklem do. He can do two main things which is set interest rates and influence the money supply. The money supply part is largely done behind the scenes and is not something the public is generally aware off therefore not directly influencing their behaviour. Interest rates are different and people react heavily to this. The unofficial “hidden” power that Tiff Macklem has is influence. Even if the bank doesn’t do anything Tiff’s words carry enormous weight.
So lets put ourselves in Tiff’s shoes. He needs to ensure that housing prices deflate but do not burst. This is a hard enough task but doable. Unfortunately for him he has another huge problem, inflation. During the pandemic inflation rose and now even though it is falling it is still higher than their target of 2% (1%-3% ). Now if Tiff wanted to crush inflation he could raise the interest rates even more, wait for 2 more years until everyone finishes renewing their mortgage, and inflation and the expectation of inflation probably solved. This would lead to housing prices crashing and instability.
Instead he could use human behaviour. Two important things to remember are people value losses far more heavily than gains/no change and people trust the Central Bank. The Central Bank has repeatedly said since inflation got higher that it will get back in the expected range in 2 years. They communicate but don’t say they will cut “soon” and the higher interest rates won’t last very long. By doing this they are slowly devaluing housing through inflation but also keeping an expectation of low interest rates in the future thereby preventing a rapid depreciation in housing prices. The Central Bank can continue this strategy while trust in them remains high. Even though someone’s house is worth less because of inflation people don’t feel that they lost money because their dollar valuation remains unchanged. Until governmental policies change that result in an increased supply and/or reduced demand there isn’t much else I think that the Central Bank could do. They are doing a great job and we as a society are better of because of them.
Eventually when housing and inflation hopefully become stable again and the government gets its act together in the next boom cycle we will stop treating housing as the best asset to invest in. This will mean that the average household will spend a lower percentage of their income on housing and be able to invest their savings for retirement in things that actually boost productivity. The hidden cost of the rising housing prices has been we have screwed ourselves out of productivity growth. To quote Paul Krugman “Productivity isn’t everything, but in the long run, it’s almost everything”.
I believe the owner/renter ratio remains fairly consistent at 2/3:1/3 approximately. This ratio would vary region to region. The fact that house prices have increased 38% and rents 24% tells me that this is not a good time to invest in real estate. Unfortunately, a further shortage of rental properties will only cause rents to rise (soon to a level most people cannot afford) and until house prices decline (no guarantee) rents will remain unaffordable. Also, building new apartments, townhouses, mutli- family, whatever else, has become too expensive, therefore, not the solution. The best approach is to decrease demand.
Great discussion @Leo
I’m also interested to see the balance between owners/renters, not just buyers/sellers. The past 5 years indicates that prices have increased around 38.5% for an average Canadian home vs. 23.9% for rents. In BC, these stats are about 36.5% vs. 35.5%. The I imagine the rent-to-house-price ratio might track similarly to SNLR.
Sources:
House prices:
https://tradingeconomics.com/canada/average-house-prices
https://www.statista.com/statistics/604245/median-house-prices-british-columbia/
Rent prices:
https://rentals.ca/national-rent-report
https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/TableMatchingCriteria?GeographyType=Province&GeographyId=59&CategoryLevel1=Primary%20Rental%20Market&CategoryLevel2=Summary%20Statistics&RowField=TIMESERIES
In town isn’t all bad. The highway strip sucks, and east Duncan isn’t great but Centennial heights on the west side is a nice little neighborhood that is walking distance to town.
Agreed that there is lots of upside to the region, including hotter summers!
I like Duncan , I wouldn’t live in town but some real nice spots close by . It has everything u need in a small town . I think it has good upside
Tim Hortons should become an Automat: https://en.wikipedia.org/wiki/Automat
Or get a bunch of robots to serve people
Yes It is! Its way too long. Maybe we just need better Immigrants.
If you lived In Duncan for just one week…That would completely change your perspective of buying a house In Duncan.
I suggest you rent first, just to understand how much It would suck to actually live there.
The Malahat does shut down…And long weekends are a bitch for commuting both ways…And Its a Rez…Just to name a few!
Those are some sweet house gains , it’s time to wind up our market and inflate away that debt
If you’re looking for a decade where stocks fell you’re likely thinking of the 1930’s, not the Roaring 1920’s.
As the DOW chart shows, cashing out end of December 2029 after the ‘29 crash wasn’t so bad. Stocks still up 3.5x for the complete decade of the Roaring Twenties.
Next msg
What happened that ended the roaring 20s?
In keeping with my belief that we are in the Roaring Twenties globally, here’s a chart showing US house prices have already risen about as much or more in the twenties SO FAR than any of the last 3 COMPLETE decades. (Note this is the US, not Canada. Although Canada in the twenties is so far on pace to beat the other decades)
This is not surprising, because past periods of rising rates and inflation saw huge house price increase too, like the 70’s when inflation/rates rose and prices tripled.
Thanks Leo, that’s a good summary of the MOI and SNLR .
I also use the average Days-On-Market as it illustrates how quickly inventory is being absorbed.
It’s never going to be perfect because the real estate market, especially the single family sub market, is not made up of homogenous housing. In the case of older housing – no two homes are the same.
That’s one reason why I prefer to look at downtown condos as there is less variation in age, quality, and condition. Or subdivisions of homogenous housing such as Royal Bay.
A factor that I expect to happen before one sees a definite increase or decrease in the median price is a change in utility. In other words, are today’s buyers obtaining better value for their money even although the price is the same as 3, 6, 9 or 12 months ago?
Taken all together it provides a well supported opinion as to whether we are in a buyers/bear market which favors buyers and most often leads to lower prices, concessions, or favorable terms and conditions for the buyer.
Since I do get to read the Contracts of Purchase and Sale, as it is part of my job, there are developments in the Westshore that are giving concessions or upgrade packages to buyers. If you are not aware of these concessions then the pricing may not make sense as some time the reported real estate board sale price doesn’t reflect these changes. A property sells at full price but the buyer is given $75,000 in upgrades.
In these cases 1 out of the 4 had a suite.
Do these houses have suites?
I think I showed your house and that is a super nice package you have and presented 10/10! My 1st time buyers were thinking about writing an offer, but didn’t want to compete in the end. Congrats on the sale! (pretty rare buyers bail on rescission). I noticed your coop was lower too so really well executed on the real estate fees too. Smart all around.
Quick Update on our house sale: 3 DOM before an unconditional offer just below asking. House showed well with tenants paying market rent. Seems like some posters were right – the inventory that is still moving are these $1M core SFH with a suite. Rescission period ends Wednesday. Happy to have it over quickly, my wife did not like people coming into and out of the house with the 8-9 showings we had as she works from home and it was quite disruptive.
Meanwhile, in Calgary:
‘Several pages’ of amendments expected as deliberations begin for blanket rezoning proposal
https://calgaryherald.com/news/local-news/amendments-expected-deliberations-begin-blanket-rezoning-proposal
… the proposal has garnered significant opposition, with roughly 70 per cent of speakers at the recent public hearing against the idea.
Ward 7 Coun. Terry Wong said … “The question is, how do we skate in between to address the housing crisis, but at the same time do it in a more temperate sort of way?”
Up island house hunt anecdote update: A house in Duncan was accepting offers yesterday and they were priced well at around 750k. The house was nice and had many updates, but I wouldn’t say it was priced exceptionally low or anything, about average for what we’ve seen with comparable houses. They received multiple offers. We offered a smidge over asking with the usual conditions and were unsurprisingly outbid.
It seems with the “reserved date for offer acceptance” strategy, there is still room for competitive buying. As I mentioned in another post, we are seeing this strategy come back like it’s 2020 more and more in the CVRD. I think we personally looked at 4 houses who were employing this model in the last few weeks.
Agreed, Trudeau is still hell bent on bringing in more immigrants.
Yes, it is a trade-off. We have housing and health care crises, but at least the line-up at Tim Hortons isn’t too long.
Hi Leo, can you draw the graph “Market Balance Indicators in Victoria” for a longer period, starting from 1970? The situation right now is closer to the stagnation periods during the oil crisis during the 1970s and 1980s.
Leo in the “Fixed Mortgage Rates and Bond Yields” Graph what are the different coloured lines supposed to be?