1835 replies to this topic

[dasmo]

Just watch for wages to go up. Then rates go up....

[Mike K.]

Any rise in our rates will strengthen the dollar, which will weaken manufacturers and exporters.

It's a tight rope, for sure, and for now I'd say most economists are content with keeping the rates low and just riding on on inflation alone.

[SamCB]

A raise in rates would send Canadians into a 2008-style foreclosure crisis. It'll get even worse as more millenials buy with just-enough cash to get into home ownership. I think the policy makers and the banks will do whatever they can to avoid that kind of crash. As long as the media is reporting "household debt levels at all time high" the rates will not rise. Of course this means people will take on more debt, as it's cheap right now. So essentially yes, this is the new normal. Something will make this debt spiral implode at some point, but it won't be a BoC rate increase.

[Mike K.]

Record low real-estate inventory, stabilized pricing and bidding wars in store for Victoria

http://victoria.citi...e-for-victoria/

 

Re-sale housing inventory on southern Vancouver Island is at its lowest level since record-keeping began some 20 years ago, according to the latest figures released by the Victoria Real-Estate Board.

 

A total of 1,948 properties are currently listed on the Multiple Listings Service, a drop of nearly 40% from this time last year.

 

“We’re currently seeing the lowest re-sale inventory in decades, and for sure the lowest since the real-estate board started tracking the data in 1996,” says REALTOR® Marko Juras of Victorias’ Fair Realty.

 

Last October some 3,200 properties were on the market. In 2014 inventory stood at around 4,000 properties, and a year earlier over 4,300 homes were available. [Full article]

[lanforod]

Seems a bit contradictory. I know you/Marko try to address that in the article, but still...

 

Some areas are likely still driving up high? Do we have an increase in foreign buyers here, like they are seeing in Toronto, due to the new tax in Metro Vancouver?

[Mike K.]

Prices have plateaued, but due to the low inventory environment some properties will still ignite crazy fire storms like what happened on Scott Street the other day. My gut feeling is the property was ridiculously underpriced if it drew as many offers as it did.

[LeoVictoria]

Prices have plateaued, 

 

I doubt it.   We have never had market conditions so heavily tilted towards the seller as this year, and prices don't plateau for any length of time with those kind of conditions. 

Prices have taken a breather after the huge increases of the fall, but we have seen this before in hot markets.  Prices should continue to go up in the spring (modulo the effect of the new mortgage rules tempering the market).

 

Edited by LeoVictoria, 25 October 2016 - 06:28 AM.

[Mike K.]

In the spring, quite likely. But since March they've held steady with the median deviating just slightly.

There's an affordability factor at play now. If the majority of buyers can't afford to stretch any further, they won't pay what the seller is asking. $650k is likely going to be the new normal well into next year. We might even see a bit of a dip.

I guess the big question is, why is inventory at below 50% of where it was three years ago? Is the economy so good, that few are leaving? Purchases have eased to where they're not significantly higher than last year but even then we had over a 1,000 more listings last year than we do now.

[Szeven]

In the spring, quite likely. But since March they've held steady with the median deviating just slightly.

There's an affordability factor at play now. If the majority of buyers can't afford to stretch any further, they won't pay what the seller is asking. $650k is likely going to be the new normal well into next year. We might even see a bit of a dip.

I guess the big question is, why is inventory at below 50% of where it was three years ago? Is the economy so good, that few are leaving? Purchases have eased to where they're not significantly higher than last year but even then we had over a 1,000 more listings last year than we do now.

 

The top thing that comes to mind for me is that Canadians, and Victorians especially, think of housing as a riskless investment. Anecdotally I know quite a few people now who's largest investment is a 2nd house, 3rd house, small apartment block etc. With price reinforcing their thesis, I think its a herd mentality that you never should sell.

[LeoVictoria]

In the spring, quite likely. But since March they've held steady with the median deviating just slightly.

There's an affordability factor at play now. If the majority of buyers can't afford to stretch any further, they won't pay what the seller is asking. $650k is likely going to be the new normal well into next year. We might even see a bit of a dip.

I guess the big question is, why is inventory at below 50% of where it was three years ago? Is the economy so good, that few are leaving? Purchases have eased to where they're not significantly higher than last year but even then we had over a 1,000 more listings last year than we do now.

 

If affordability is the main constraint, then prices wouldn't go up in the spring.   Incomes aren't going to increase much from now until then, and credit will be more difficult to get.  More likely it's just some mean reversion.   

 

Inventory is low because sales are crazy while new listings are about average.  People are hesitant to move up in the market because the market is dysfunctional and the risk is they sell their house but then can't find something they want because they're stuck in bidding wars.   Not a pleasant environment to buy in.   Once the market calms down a bit I think we will see more listings as people start trading houses. 

[Mike K.]

Ok, I think that's it, people are hesitant to sell and then find themselves without a comparable trade that doesn't require an additional mortgage.

I also think SZeven is on to something. We might be seeing the effect of long term investment plays where properties are held for decades. Hmmm.

But affordability is definitely a factor. Marko was saying that $650 is the threshold for the local market. And even then that's a huge sum of money to throw at a single family dwelling. Foreign and boomer investment might fuel 20% of sales but if the locals can't dig any further into their pockets they'll dig their heels in and prices will either stabilize for the long term or begin to ease. Every few years we seem to hit a new plateau and this might just be it.

I think I'm going to retract my statement that prices will rise in the spring. I can't see it with the new mortgage rules and the already high prices for a relatively captive market with limited income potential.

[North Shore]

In the spring, quite likely. But since March they've held steady with the median deviating just slightly.

There's an affordability factor at play now. If the majority of buyers can't afford to stretch any further, they won't pay what the seller is asking. $650k is likely going to be the new normal well into next year. We might even see a bit of a dip.

I guess the big question is, why is inventory at below 50% of where it was three years ago? Is the economy so good, that few are leaving? Purchases have eased to where they're not significantly higher than last year but even then we had over a 1,000 more listings last year than we do now.

 

I've started to wonder if the 'Vancouver effect' is coming into play - either offshore money, or people cashing out of Van for lifestyle here. If I was a Vancouver-based professional, with job mobility, I'd be having a hard look at selling there, and living mortgage-free, or even retiring, here..

 

The top thing that comes to mind for me is that Canadians, and Victorians especially, think of housing as a riskless investment. Anecdotally I know quite a few people now who's largest investment is a 2nd house, 3rd house, small apartment block etc. With price reinforcing their thesis, I think its a herd mentality that you never should sell.

It would seem, with rental rates at all-time highs, that an investment property is the way to go.  I think that you're fooling yourself if you think that it's riskless, but as long as you can service the debt comfortably on the income from the property, then a 25% price rollback shouldn't be that much of a problem.. or am i out to lunch?

[Szeven]

It would seem, with rental rates at all-time highs, that an investment property is the way to go. I think that you're fooling yourself if you think that it's riskless, but as long as you can service the debt comfortably on the income from the property, then a 25% price rollback shouldn't be that much of a problem.. or am i out to lunch?

Well this is a much larger question than this thread. It's basically the be all end all question of the entire investment universe.

Sure, a 25% move down takes the equity of anyone that purchased recently with 25% down because of the leverage. They would be destroyed, and I don't know how a renewal would go with less than 25% equity. But, I don't see any down in move in prices shaking the confidence of generations of Canadians who believe housing is risk less. Any dip would be met with enthusiastic buying. Only a reversal in interest rates or the economy can shake the confidence, and I don't think anyone can predict the direction of those factors with any real certainty.

The people I know who are landlords are under 40 and have never experienced a recession in their adult lives. They just look at the almost free 4x leverage, the rising prices, and the potential for rent increases as the only factors. Some people weigh it more realistically of course (like Marko, I like his angle it's smart imo).

Talking prices though is like talking stock market index levels. Sure the S&P is at 2150 (right at all time highs), but within that some things are historically high and some are historically low. In the stock market people look for an angle where they think they have an edge on valuation. In Victoria housing, I think most people just panic buy whatever they can the second they save up enough cash and can service new debt.

[Mike K.]

I think that last paragraph is bang on. The panic buy effect is exactly what we see here, even if it means over leveraging the perception is the value will jump and equity will materialize quickly.

[VicHockeyFan]

I have an off-the-wall question.  What percentage of people do you think own two or more homes?  Either a vacation home they use themselves, or a second house or condo they rent out?

[nerka]

I have an off-the-wall question.  What percentage of people do you think own two or more homes?  Either a vacation home they use themselves, or a second house or condo they rent out?

http://business.fina...-properties-too

 

This article quotes 1 in 20 households owning a rental property. If you counted vacation homes/ second homes, etc. the number would be higher.

[Nparker]

...What percentage of people do you think own two or more homes?...

I barely own one. I suppose I can dream of being a property magnate.

[LeoVictoria]

See Vancouver for a market where people also think that prices can never go down.  However in the last year we saw irrational exuberance compounded with foreign investment drive that market over the top and it is now in the process of unravelling at a truly alarming pace.    We aren't nearly as overvalued as they are though so it's anyone's guess what will happen.   Personally I think the market will move towards more balance but we will not see any price declines.   Gradual increases next year. 

[LeoVictoria]

Thing about house prices is that just like with cars, people don't look at the price.  They only look at the monthly payment.   

Despite our crazy runup in prices in the last year, and in the last decades, dropping interest rates and increasing incomes have kept monthly mortgage payments within a pretty predictable range.   Read more:   https://househuntvic...-cmhc-says-nay/

 

[lanforod]

What does the same chart look like for Vancouver?