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Hat tip to Roger, here is a place to check if you want to look at graphs of house prices in various areas around BC. This link will take you to a graph of City of Victoria apartment prices. The graph reproduced above via a screen print shows house prices in the period from 2001 to 2008. There doesn't appear to be a positive trend forming so far this spring. Will the trend reverse?

The mood around the local bear blogs would seem to be: not this time.

New VREB stats are due tomorrow, I will try to post some graphs and numbers then.

Unfortunately I used CPanel to upgrade my Drupal installation, then had some problems uploading the back-up sql dump - I guess the site is getting bigger, and I kept getting this message: "Fatal error: Maximum execution time of 300 seconds exceeded". Bigdump to the rescue. It took awhile, after reading many very confusing solutions that all relied on SSH access or some other variation of it - which I don't have with my shared hosting. Finally, I found a clear solution over at Drupal.org (here). If this means anything to you, great, otherwise, yet another excellent argument in favour of using wordpress or blogger to build the framework of a site.

However, since this site is for my own entertainment and education (ie, it's a hobby), I will continue to roll the dice and maybe disappear a couple times a year.

Unless, of course, I end up buying a house, then I guess the site will be done.

If that happens, I promise I won't just disrupt the database. Way too many semi humorous and off the cuff predictions and rants here to ever do that. It's a semi-permanent internet archive. Have a look around if you like, leave some comments of your own. I promise to look after them.

Glad to be back.

This video includes an explanation from a Vancouver realtor (Stephen Bailey) of the US housing crisis that, while simplistic, catches some of the main points. However, the realtor goes on to say that there will not be a housing crisis spilling over into Canada because mortgage lending standards here are much higher, and teaser rates and liar loans are not common here.

I find these assertions debatable at best.

I have to disagree with the conclusion about the impervious nature of the Canadian real estate market - it will be supply and demand that determines what happens with this market, and though the factors mentioned have played a big part in what is happening south of the border, that doesn't mean other factors like forty year amortizations, zero down, buyer exhaustion or simple unaffordability relative to incomes can't accomplish the same thing in Canada, albeit in a different way.

But then, this is a realtor, it's spring, and there is a certain intrinsic optimism no matter what.

On another note, in this bouyant market, how many condos have "investors" placed on the table as poker chips?

Thousands will be completed in Victoria in the next couple years, who is going to buy all these condos from these investors, confidently playing the real estate game in this bouyant market?

Comments anyone?

King 5 News reports on the latest Case-Shiller data, which shows the first year-over-year home price decline in Seattle in over 17 years.

But Victoria is different, right?

Meanwhile, inventory in Vancouver is shooting through the roof...check comment 39 on how so-called paper equity can lead to a dangerous over-borrowing, which crushes a market once it turns:

You start with nothing and borrow $100 and pay $100 for a house. Your assets and liabilites are both $100. The prices around your house rise to $150 so you think your house is really “worth” $150 so you borrow $50. Now your assets and liabilities are both $150. If the market tanks and the house is now worth $50, your assets are now only $100 but your liabilities are still $150.

That’s what people did in the states - they borrowed too much and now owe more than the property is worth.

Google Casey Serin to read all about what happens when you try to take your profits before actually selling. He kept borrowing against false equity and ended up $2 million in debt and lost a bunch of houses to foreclosure before his 25th birthday.

Here is another update comparing the months of inventory (MOI) based on February 2008 numbers vs average sales from the three months of February 2008 and March and April 2007. This gives a better estimate of months of inventory going forward, considering listings as well as sales tend to pick up at this time of year.

I expect sales numbers to be lower this month (March 2008) compared to last year (March 2007).

Affordability must still be an issue, because the only bracket with any obvious shortage of homes and little change is the sub-median single family home bracket.  Listings are skewed again above the median for all property types, and so are the months of inventory.

I have taken the advice of awum given on the previous entry, and will be rolling the results of the search for townhouses in with a search for duplex and triplex units, and presenting those numbers as the townhouse numbers on these tables going forward.

Previous results shown in earlier graphs were for townhouses only and therefore you will see a jump in these numbers.  Based on my old search criteria, currently there are 77 townhouses for sale below the median price, and 189 for sale above the median, so even using the old metric, the MOI for townhouses has increased.

At the top of the price ladder, million dollar plus listings continue to pile up. At present, there are 256 such properties listed on the VREB area of the MLS.  Based on the February 2008 sales of such properties, that is 25 months of listings. Even based on the December and January sales, which were around 19 per month, there is now around 13.5 months of inventory. Looking back at some good months in the past year, where around 25-30 such properties would sell, the MOI now sits at 8.5 months plus.  That would be a best case scenario, with no additional expensive properties being added to the inventory. 

Again, when does the million dollar house become the $900,000 house, and so on?

Now, for predictions and guesstimates.  If the spring was hot, I think you would see inventory going down, not up.  While I won't predict a month to month drop from last months unit sales, I will predict a year over year drop for all property types.  As to million dollar properties, I do not expect to see much improvement this month either. For single family homes, will the drop in average price trend continue?  I'm not sure that will happen, but I do expect the median price to be lower than last month. 

Current median prices in the VREB area are $543,500 (sfh), $395,000 (th) and $299,450 (condo).

The recent average single family home (sfh) price trend in VREB:

December 2007 - $624,450.

January 2008 - $606,449.

February 2008 - $587,295.

March 2008 - ???

What are your predictions for the March madness?  New VREB numbers are due out next Tuesday, April 1, 2008. 

*** 

In other news and one opinion, CIBC is facing a whopping 25 billion dollars of exposure to monoline insurers, some of which are not rated AAA.  What happens if depositors get nervous about all this exposure and start moving to other banks?  Hmmm, can you say Northern Rock?  Which is being nationalized.  I knew you could.... 

Meanwhile, in Victoria, the tourism business had increased hotel revenue last year even though the number of visitors was down.  The officials responsible remain guardedly optimistic, and of course, don't mention the blight of homelessness and begging downtown.  Ah, the optimism of a tourist economy, impervious because it is different here. 

Finally, here is an interesting story on modular homes.  Everything that was old is new again. 

Paul Solman uses a domino metaphor, taking the viewer step by step through how problems in the housing market spread into the wider economy.

Bill Maher and panel discuss economics. Zero sum gain or relative gain?

"Alan Greenspan has made a career out of making convoluted statements about the real consequence of his monetary policies at the Fed. In vintage Greenspan doublespeak, the former Fed Chairman blatantly lies about not only his support of the Bush Tax cuts but also his direct contribution to the real estate and credit bubble that is now exploding all around us. His most egregious lie is to suggest that he tried to prevent the bubble by raising rates but was hampered by capital inflows as a "result of the end of the cold war." What he fails to mention is that it was his dropping of the Fed Funds rate to 1% that facilitated this credit expansion, and the fact that he tried to raise it later in 2005 in the face of an inverting yield curve is meaningless, not to mention that his theory about foreigns savings being at fault for the rise in liquidity directly contradicts the fact that the Fed's massive liquidity surge enabled capital inflows to be used for credit expansion. Without a loose monetary policy (i.e. low rates) it wouldn't make a difference what foreigners wanted to do with their money - it would not have lead to a credit bubble." -- Viracocha9

Liquidity for the investment banks for a broad range of investment grade investments. Whatever that means.

Okay, this time I thought I'd try something different, like comparing the months of inventory based on February 2008 numbers vs average sales from the three months of February 2008 and March and April 2007. This gives a better estimate of months of inventory (MOI) on hand going forward, based on no additional listings to speak of piling on and a pick-up in sales.

Frankly, I expect sales numbers to be lower this year, so these numbers are probably a bit better than they will look in another few months, but let's work with them.

As you can see, the impression of a hot market continues to burn at the bottom of the affordability bracket. Listings are skewed above the median prices for all property types, and so are the months of inventory above the medians. Looking at the three month average, things look a bit better, but of course looking at the numbers on a month to month basis going forward should yield a different and not so nice result, unless of course unit sales this year exceed last year, which so far they are not on track to do. Months of inventory are rising in all above median brackets, however you look at the numbers.

At the top of the price ladder, million dollar plus listings continue to grow. At present, there are 247 such properties listed on the Victoria area of the MLS. Based on the February 2008 sales of such properties, that is 24 months of listings. Even based on the December and January sales, which were around 19 per month, there is now around 13 months of inventory. Looking back at some good months in the past year, where around 25-30 such properties would sell, the MOI now sits at 8 months plus. And whichever metric you choose to measure by, the total number of such properties continues to grow.

Which begs the question, when does the million dollar house become the $900,000 house, and so on?

While it is too early to say, it would appear that VREB numbers are again going to be lower in March 2008 compared to March 2007. Will we see the drop in average price trend continue for another month, or will there be a bounceback effect? I guess that depends on how many multi-million dollar places sell.

Average single family home (sfh) price trend in VREB:

December 2007 - $624,450.

January 2008 - $606,449.

February 2008 - $587,295.

March 2008 - ???

Stay tuned.

This BBC story on tent cities sprouting up in the US due to the subprime crisis focuses on LA.

I guess this story is somewhat resonant because, while there is not a huge foreclosure problem in Victoria, there is an affordability problem, and perhaps a resultant problem with homelessness and begging.

Some recent comments on some of the other local Victoria blogs like HHV and Victoria's Truth have focused on "Strit Peeple", rusty cars, scowl faced lumberjacks and hillbillies.

What would Jack Kerouac have said about all this anyway?

^{..... with 60,000 houses repossessed in the last month? Just down the coast.....}

I'd like to give some credit to a realtor in North Vancouver, Paul Boenisch, who recently reported that the market is cooling, requiring sharp pricing to get a quick sale. In fact, while prices are not going down yet, inventory is growing fast and if this continues prices will go down. The exact quote was:

"We are getting mixed signals. We see steady price gains month after month. On the other hand, sales are down 6.4% and listings are up 26% . If this trend continues the only direction is down for prices."

It seems a certain minority of realtors understand the economic situation and don't bother to act as cheerleaders, but rather acknowledge the situation and work within it. In a way, realtors who are relatively successful should have a good gut instinct about when things are going well due to the numbers of sales versus the numbers of looky-loos and no hope listings that make up a portion of their work. When a Realtor keeps rah-rah sales BS in check, and speaks frankly about the market, they provide a valuable service in any housing market. Some examples of this I have found in my internet rambles since starting this web-site include Scott Simmons, Mike Morgan, Paul Boenisch and to some extent Rob Chipman. They are writing, publishing or hosting messages that other realtors might not be so happy to see distributed, if they believe their continued livelihoods depend on a sunny economic view, no matter what.

Do the readers know any other realtors who are not ladling on the candy coating or handing out the rose coloured glasses, who are encouraging buyers to "price sharply" or even possibly to "bid sharply"? If so, feel free to provide links here in the comments and to relate any interesting quotes.

On the other hand, maybe you are meeting realtors who take the other point of view, who drank so much real estate kool-aid, they bought a bunch of presales themselves and have been busy flipping houses. They can't acknowledge the tides have turned, or they confuse paper profits with money in the bank, they are not going to be able to play the next round under new rules, and don't understand that the property market is cyclical.

Is rah-rah enthusiasm with markets at levels many real estate bears consider madness, is that highly suspect, or merely misplaced optimism?

In other words, if the only way a person/couple/family can buy a selected property is with no down payment, variable rate, 40 year amortization, in a time of global economic disruptions, is it appropriate for realtors to avoid mentioning any potential for a downturn?

It's okay to stay positive when you are positive that everything is positive. Otherwise, you could be jeered and maligned like that other former media mouthpiece of the NAR, David Lereah.

I should clarify - David is an economist. Even economists can't get it right all the time.

Well, chalk up some more million dollar + inventory. A few days go by, and another few properties are added to the waiting list. The inventory of single family homes increased as well. Over 8 months of "above median" condo inventory is now listed, based on the February 2008 VREB stats. This is March, shouldn't buyers be taking up the slack by now?

I see over at Rob Chipman's site his most recent report of price changes was that 90% + of all changes were reductions. Also, the average list price in Chipman's area was $556,677, while the average sale price was $548,169, a difference of $8,508, or 1.53%. Which is lower. Is that a hot market? I know Vancouver and Victoria are not the same place, but I would assume that Victoria is not the tail that wags the dog--but rather, the opposite is about to occur.

That is to say, when prices in Vancouver start falling due to the mother of all condo gluts, all outlying areas, including Victoria, are going to get slammed.

But perhaps you disagree?

Here are some other interesting topics:

The NY Times has a story about how non-residential construction is faltering.

Meanwhile CMHC reports that Canadian housing starts soared in February 2008.

Ben Bernanke proposes lowering principal balances of underwater borrowers, rather than helping with temporary interest relief measures.

Can I get some of that free money? I mean, if I could buy a $700,000 Fairfield house and then get the bank to forgive $300,000 of principal, that would be sweet! Even sweeter, the seller gets the full freight, and the game of musical chairs can continue for another round. Sounds like a win win situation to me...

Well, what is there to add?

Two months ago, 19 million dollar plus properties sold. Last month only ten. Is it a glitch or an alarming sign that the top is in?

Can anyone selling a million dollar plus property in Victoria ignore 1-2 years of months of inventory (MOI)? Does the million dollar house become the $900,000 house, and so on?

This table shows the disconnect between the top and bottom of the VREB housing market. Months of inventory are already much higher at the top of the market than the bottom for all property types. Is affordability finally having an effect? Is it the credit crunch, are humongous mortgages now too difficult to get?

Or has all the smart money headed to the sidelines?

Predictions of blogging real estate bulls notwithstanding, this is not a market poised for a strong spring season.

As noted by Rob Chipman, the majority of recent price changes in his market area in Greater Vancouver (around 85%) have been price reductions.

Victoria is facing growing inventory while buyers have not stepped up in equal numbers. As Tony Joe of VREB noted in his monthly wrap up: There is a "strong demand for homes that are realistically priced."

Overnight interest rates have dropped again, without much impact on mortgage rates. This is not a sign of strength and independence of the Canadian financial system from US financial rot.

Average single family home (sfh) price trend in VREB:

December 2007 - $624,450.

January 2008 - $606,449.

February 2008 - $587,295.

Cold hard light of a drizzly neon day flickers and sort of illuminates the dreams of home ownership clutched at by the huddled meager working classes of America. Thanks for the encouragement to keep working hard toward our dreams, ProlefeedTV.

Some interesting analysis of the current US economic situation, how it could be handled or should be handled, with comments from Ron Paul, Ben Bernanke and Nouriel Roubini.

Promo piece for Peter's book.

Thanks for the video montage on the current housing situation, obsidian2012.

Peter Schiff has been laying this all out for awhile, why does anyone act as if the current US economic situation is a surprise?