cheaprealty net

Peter talks with a caller about the possibility that a credit contraction necessarily produces deflation similar to the Great Depression.

Peter differentiates between deflation in terms of value of goods compared to the price of gold and inflation in US dollar terms because the prices of items in a global market will still be going up in terms of US dollars.

Peter argues that the US is more comparable to Argentina (hyperinflation), rather than Japan, where there has always been a high savings rate.

I did a search for condos in the VREB area of the MLS (2008/02/27). The total continues to increase, though only slightly in the past few days. Today there were 1032 condos for sale!

The number of condo listings at Craigslist continues to grow. Today, there were 101 condo listings. Mind you, by the time you click the link, the number could go up or down.

In the attached graph, you can see the result of my usual inventory overview MLS search, which shows how many total properties were available in various price ranges, in the Victoria Real Estate Board area, on February 27, 2008.

Compared to the search a few days ago, inventory is up overall, with some increases/decreases in total listings in various price ranges.

Based on the sales numbers for "million dollar plus" properties from January 2008 (19 of all types sold), there is now over a year of "million dollar plus" inventory available in the local market. Inventory of expensive properties continues to grow. Can all these sellers afford to wait up to a year for a sale? Are they all testing the market and happy to end their listings without a sale, if the price isn't right?

Are the sellers richer or poorer than they think?

Here's a link to the previous snapshot, in case you want to make a comparison.

Comments are welcome.

Video montage of mortgage crisis.

condo troubles in Vancouver

I did a search for condos in the VREB area of the MLS (2008/02/23). Today there were 1024 condos for sale!

Only 291 were listed below the January 2008 median price ($305,000), while 733 were more expensive. So only 28% of condos are currently listed below the most recent median price, while 72% are listed higher.

By the way, there were also 265 townhouses, and 880 single family homes
listed for sale as of February 23, 2008. Again, most are priced above the recent
median prices.

Only 272 single family homes were listed below the January 2008 median price
($530,000), while 608 were more expensive. So only around 31% of the single family homes currently listed were priced below the recent median price, while 69% were asking more.

Put another way, around half the recent house purchases were concentrated in the bottom 31% of the single family housing inventory.

67 townhouses were listed below the January 2008 median
price
($393,000), while 198 were more expensive. So around 25% of the townhouses currently listed were priced below the most recent
median price, while 75% were priced higher.

As a potential indicator of the number of amateur landlords, the number of listings available at Craigslist continues to grow. Today, there are 99 condo listings. Mind you, by the time you click that link, the number could go up or down a lot. My guess is up - the number of search results has risen steadily for the last month - a sign more and more people, er, flippers, are listing their "investment properties", perhaps?

With this story you can see my usual inventory overview snapshot graph, which shows how many properties are available in
various price ranges, in the Victoria Real Estate Board
area.
The graph shows the inventory available in a search of the local MLS
on February 23, 2008.

Compared to the last search a few weeks ago, inventory is up in every price range.

Based on the sales numbers for "million dollar plus" properties from
January 2008 (19 of all types sold), there is around a year of "million dollar plus" inventory now on the market. Inventory
of expensive properties remains high. Will some of these sellers wait
up to a year for a deal, or will they begin cutting prices to get the jump on their competitors? Hmmm.

There seems to be some kind of serious disconnect occurring when cheaper junkier housing sells fast, yet up the price a few hundred thousand dollars and inventory is ballooning.

Maybe there are not that many buyers for expensive houses anymore, but the sellers, who all feel they are "richer than you think", have not figured out yet that they might not be able to sell for those magical numbers.

In the long run, lower
prices are the best thing that could happen to this over-ripe market.
Here's a link to the last snapshot, in case you wanted to make a comparison.

Comments are welcome.

In this video some amazing stats are rolled out - particularly that the rate of sales is mimicing the rate of foreclosures.

If you want to sell, that's what you are now competing with in Sacramento - foreclosures.  Median prices have dropped 26% since January 2007.

Let's see some of that this year in Victoria! 

According to CNN, Goldman Sachs research reveals 30% of mortgages nationwide, or 15,000,000 homes, are now worth less than the mortgages people are paying for them.

It's not over yet, 15,000 households with negative equity is a big drag on the housing ATM.

Comps are going to be going down as a result.

Subprime: Word of the Year!

Subprime woes to hit student loans.

Meanwhile, there are 1008 condos, 844 single family homes and 264 townhouses available in a basic search of the MLS for the VREB area (February 20, 2008). Not much change from a few days ago. Has the pace of listings begun to slow?.

Today I found 1008 condos, 844 single family homes and 256 townhomes listed in a basic search of the VREB area of the MLS.

Just a question, forget about the market, think about your own finances. Based on that, how much should a cheap condo cost? Imagine the mortgage rate is 7%. What does that do to the cost? Imagine you were given that condo for free. How much would that still cost? Could you look after it?

So for Victoria or wherever you are, where is the point that the price has fallen so far you would think you were really getting a deal?

Would you be buying a bigger place, or just getting into the game?

Shiller praises Ben Bernanke's knowledge of the great depression as a useful guard against making some of the same mistakes made during that earlier time.

Shiller said he considers it to be a historic housing bust right now in the States.

Shiller emphasizes how much confidence matters.

However, if the situation isn't handled right, a serious recession is on the horizon.

The interviewer attempts to spin the conversation into how the current "correction" has provided a "good time to buy", but Shiller shoots that down by pointing to the complete misalignment that is affecting the entire economy.

Robert Shiller makes some up to date comments on the current situation for housing in the US. Wish I could ask him what he expects for Victoria in the near future.

I did a search for properties in the VREB area of the MLS (2008/02/09). Today there were 972 condos for sale! There were 812 single family homes listed. And there were 231 townhomes listed.

Only 262 condos were listed below the January 2008 median price ($305,000), while 710 were more expensive. So only 27% of the condos currently listed were priced below the most recent median price, while 73% are priced higher.

Put another way, around half the recent condo buyers were concentrated in the bottom 27% of the condo market.

No wonder luxury sellers like Bear Mountain have to scour the planet looking for deep pocketed buyers - local buyers have a lot of choices in the more expensive brackets.

Only 262 single family homes were listed below the January 2008 median price ($530,000), while 550 were more expensive. So only around 32% of the single family homes currently listed were priced below the most recent median price, while 68% were priced higher.

Put another way, around half the recent house buyers were concentrated in the bottom 32% of the single family home market.

Only 50 townhouses were listed below the January 2008 median price ($393,000), while 181 were more expensive. So only around 22% of the townhouses currently listed were priced below the most recent median price, while 78% were priced higher.

Put another way, around half the recent townhouse buyers were concentrated in the bottom 22% of the townhouse market.

With this story you can see my usual inventory overview snapshot graph. This is just a simple total: how many properties are available in various price ranges, regardless of property type, on a particular day, in the Victoria Real Estate Board area.

This graph shows the inventory available in a search of the local MLS on February 9, 2008.

Based on the sales numbers for "million dollar plus" properties in January 2008 (19 of all types sold), there are currently around 11 months of "million dollar plus" inventory on the market. Inventory of this high price range remains high. Will some of these buyers wait up to a year for a sale, or will some begin cutting prices?

Here's a link to the last snapshot, for comparison.

For an even more interesting comparison, take a look at this link to the inventory levels in August 2007. There are already more properties on the market in almost every price range, except the million dollar plus properties. So summer inventory levels have arrived in February, I wonder if anyone else will be adding to those piles of listings in the months to come, or if there is about to be a surge of transactions with lots of willing buyers.

To be continued....

Are Alberta buyers on the way? Are they extracting windfall equity and looking for a hot place to buy? I was over checking out the Alberta Bubble blog, and it is pretty interesting to read the discussion there of how quickly the Calgary market has changed. Is this support for the continued myth of Victoria as a destination of choice for significant numbers of Alberta buyers?

Valuations are not sustainable in an absence of buyers willing to pay particular prices. As surely as your friends tell you real estate always goes up, it is stalling, as surely as that, things change. Even with oil rich Albertans in the neighbourhood.

What does this have to do with Victoria? Well, it was just last year that the story of Alberta buyers was rolled out to the local press, swallowed and regurgitated as a factual influence on the local market.

Check out this example.

If Bear Mountain needs to go far afield to find buyers, what does that tell you about the capacity of the local market to support stratospheric condo prices?

Since that time, VREB has published a newer version of the Victoria market story, one in which the Victoria market is largely local. This should not really be a surprise. What is a surprise is that it could ever be considered otherwise.

This is not Vancouver of the 90's, a convenient drop off point and escape from a communist Hong Kong, flooding with dollars escaping a potential totalitarian grasp.

As Tony Joe, President of VREB said, "With such a large percentage of buyers originating in the Greater Victoria area it’s clear that the market is primarily being driven by local people who are moving up or down in the market to meet their changing needs or who are entering the market for the first time."

Why the need to mention the almost forgotten first time buyer?

Could it be because with troubles in US and Alberta real estate, and the rising Canadian dollar, the moment of truth has finally come, the moment when the local market will have to sink or swim based on local economics? That is to say, the moment has finally come when the market needs to rely on "first time buyers" to prop it up?

Looking at condos on the local MLS in the VREB area, as of today there are around 967 listed. Another 70 condo listings were found in a basic search on Craigslist. Mind you, by the time you click that link, the number could go up or down a lot.

Does economic news like this bode well for the housing market this spring? Yes, I would say it is good news. If the whole mess leads to lower prices, that would be the best news first time buyers could hear.

Does it seem like I keep beating that bear drum right or wrong? Well remember the Economist Magazine calling the housing bubble the biggest bubble in history, back in June 2005? Sometimes an early call is just that, an early call. Doesn't make the call wrong, just because the timing could be better.

Relying on housing as an easy source of tax revenue and retirement savings has come at a cost. Is it really better in the long run for another generation of first time buyers to step up to the plate at all-time high valuations, with minimal downpayments, with 40 year amortizations, and sign on the dotted line for run down, too small, decrepit, junky properties, so that the current generation of home owners can cash out?

I mean, is there anything else available to the prudent first time buyer?

Will this be the year prices reverse and fall. Wouldn't that be a good thing, and help solve so many local social ills stemming from severe housing unaffordability?

Hmm, we'll know pretty soon now.

Fed has been stopping recessions - which is causing bad debts to accumulate.

But when real estate prices are going down, the whole underpinning of the system is gone.

This is just a simple total: how many properties are available in various price ranges, regardless of property type, on a particular day, in the Victoria Real Estate Board area.

This graph shows the inventory available in a search of the local MLS on February 1, 2008.

Continuing with a previous theme, there still are around 10 months of "million dollar plus" inventory on the market again, based on the sales levels in January (19 units sold). Inventory of "million dollar plus" properties remains at a high level relative to other price ranges. Will this oversupply go down? How patient are these sellers? The basic theme remains, this market does not show the capability to produce large volumes of high priced sales, despite producing at the bottom end of the expensive market.

Will spring sizzle? Hmmmm.

Condo median for January 2008 - $305,000 - up from last month $12,000 on 125 sales.

Single Family Home median for January 2008 - $530,000 - down from last month $6,000 on 249 sales.

Townhouse median for January 2008 - $393,000 - up from last month $5,000 on 43 sales

Lets see where the condo market goes. There are now many months worth of condo inventory on the market, a stiuation which seems likely to get worse before it gets better, considering how early in the listing season it still is. As I have noted elsewhere, while the median and average prices have reached record highs, the actual pattern of listings to sales does not show an even distribution, but rather is skewed heavily, with many more listings above the medians for all three property types. On that basis, activity at the bottom segments of the market seems unlikely to support valuations at the top of the market as it is currently composed.

If condo sales don't take off in the next few months, in volume as well as price, the contagion will not be contained any better than subprime problems were contained in the US housing market last summer.

And while some people might not like the idea, if lower prices follow, in the long run, that's the best thing that could happen for this over-ripe market.

Here's a link to the last snapshot, for comparison.