2300 replies to this topic

[pherthyl]

The bottom end of the market has dropped enough that it is once possible for couples to buy a single family house as first time buyers. This will stop a continued fall in the market on the lower end.

We have close to 100 SFHs for sale in the region under $400k - a $380K mortgage over 25 years will cost you about $1900 a month. We even have single family houses for under $350K meaning a first time buyer could be in one those with property taxes included for about $1700 a month which is reasonable for a couple with a combined income of about $72,000 a year

Your two statements contradict each other. The second one is a fact. We have massive inventory and extremely few sales (ie, high months of inventory). That means further price corrections, not a stabilizing market.

[concorde]

The bottom end of the market has dropped enough that it is once possible for couples to buy a single family house as first time buyers. This will stop a continued fall in the market on the lower end.

We have close to 100 SFHs for sale in the region under $400k - a $380K mortgage over 25 years will cost you about $1900 a month. We even have single family houses for under $350K meaning a first time buyer could be in one those with property taxes included for about $1700 a month which is reasonable for a couple with a combined income of about $72,000 a year

Those numbers are based at record low interest rates. Redo those numbers based on a small 2% interest rate hike and your mortgage payment jumps from $1900 to $2700

The only reason we have not seen any drastic price correction is interest rates have been at record low levels for over 5 years, most likely closer to 8 years

Does anyone here not remember the early 80's with 22% mortgage rates???

[rjag]

The bottom end of the market has dropped enough that it is once possible for couples to buy a single family house as first time buyers. This will stop a continued fall in the market on the lower end.

We have close to 100 SFHs for sale in the region under $400k - a $380K mortgage over 25 years will cost you about $1900 a month. We even have single family houses for under $350K meaning a first time buyer could be in one those with property taxes included for about $1700 a month which is reasonable for a couple with a combined income of about $72,000 a year

Yup, but how many come with granite countertops and stainless steel appliances?

The type of buyer looking at those types of houses would be the first timer. If they are University Graduates with a decent job at age 25 they may be earning $50k....lets call it $60k at most they would qualify for is about $275k with $25k downpayment.... so that $380k house is still out of reach. They would need a combined gross income of about $7k or $84,000 per year....anyway I didnt include closing costs and PPT etc and didnt include other debt which would be a barrier

How many 25 year olds do you know with $50k or more jobs in Victoria?

The bottom end of the market hasnt dropped enough yet, good houses that are reasonably priced will always sell, but in general the average or median price still has a ways to go to be 'affordable based on income qualification'

[LJ]

It's impossible to have proof for a future event.

We only know the facts. Sales down, prices down, inventory up, credit restrictions increasing.

There are fewer active listings now than there were for the same period last year according to VREB stats Marko posted.

[pherthyl]

There are fewer active listings now than there were for the same period last year according to VREB stats Marko posted.

You're reading those updates incorrectly. The weekly updates only show the numbers so far this month, compared to the entire month of September last year. At the end of the month we always see a bump in the listings (which no one can explain so far, Marko was going to look into it).

The most recent point of comparison is for the month of August.
August 2011 Inventory: 4944
August 2012 Inventory: 5034

So an increase of 90 listings. Not a lot more, but at the same time sales dropped by 80 over last August. So overall the months of inventory is 10.9, or a 20% increase over last year.

[pherthyl]

Those numbers are based at record low interest rates. Redo those numbers based on a small 2% interest rate hike and your mortgage payment jumps from $1900 to $2700

The only reason we have not seen any drastic price correction is interest rates have been at record low levels for over 5 years, most likely closer to 8 years

Does anyone here not remember the early 80's with 22% mortgage rates???

There is no pressure on rates right now. The economy is weak, Europe has a long quagmire ahead of it, China is looking pretty shaky, and the US recovery is snail-like.

As the housing correction spreads (we're ahead of the curve here), the economy will worsen and there will be even less pressure on rates. Mark Carney can't raise rates and he knows it. Part of the reason they had to clamp down on credit in other ways.

It's essentially unpredictable, but I don't expect rates to go up for a long, long time. Would not be at all surprised if they are still within +-1% of today's rates in 5 years. These low rates are abnormal only if you look at the last 30 years. Look back 100 years and we've had a couple periods where rates stayed at rock-bottom levels for over a decade at a time. It can and does happen.

[VicHockeyFan]

As the housing correction spreads (we're ahead of the curve here), the economy will worsen and there will be even less pressure on rates. Mark Carney can't raise rates and he knows it. Part of the reason they had to clamp down on credit in other ways.

It's essentially unpredictable, but I don't expect rates to go up for a long, long time. Would not be at all surprised if they are still within +-1% of today's rates in 5 years. These low rates are abnormal only if you look at the last 30 years. Look back 100 years and we've had a couple periods where rates stayed at rock-bottom levels for over a decade at a time. It can and does happen.

I concur. This next decade in the economy will be like nothing we've seen since before WW2.

[dasmo]

The main difference being our great depression is marked by people waiting for days in long lines for their new iPhones instead of soup...

[MarkoJ]

Yup, but how many come with granite countertops and stainless steel appliances?

The type of buyer looking at those types of houses would be the first timer. If they are University Graduates with a decent job at age 25 they may be earning $50k....lets call it $60k at most they would qualify for is about $275k with $25k downpayment.... so that $380k house is still out of reach. They would need a combined gross income of about $7k or $84,000 per year....anyway I didnt include closing costs and PPT etc and didnt include other debt which would be a barrier

How many 25 year olds do you know with $50k or more jobs in Victoria?

The bottom end of the market hasnt dropped enough yet, good houses that are reasonably priced will always sell, but in general the average or median price still has a ways to go to be 'affordable based on income qualification'

I just can't see the market dropping enough to allow a 25 year old on a single income to enter the single family home market? 275k may not be able to buy a home but certainly a decent condo.

[Mike K.]

But it's been interesting, hasn't it?

The argument has shifted over time too. In the beginning it was more about whether prices would decrease. Now everyone knows prices have and are decreasing, so it's more about if it is technically a bubble or not.

Certainly has.

Although when Househunt first appeared on the scene he was predicting drops to 1990's levels. He was adamant that prices would resettle at averages that preceded the run-up in real-estate values and his overly ambitious predictions coupled with a penchant for blogging gave a great deal of people (albeit many financially limited people*) a lot of false hope. On VV he ran up against a lot of opposition from people who had been through Victoria's ups and downs and knew what the local price plateaus were all about. Eventually Househunt's circumstances changed and he left town.

*By "financially limited people" I mean those who would never qualify for a home in this market even with a combined income and seemed to despise those who did. The commentary on HHV's and various other blogs were drenched with undertones of jealousy and negativity directed towards those who were in a position to buy a house, so the blog became as much a bearish take on the market as an opportunity for people to vent among friends. At least that was my interpretation.

[pherthyl]

Certainly has.

Although when Househunt first appeared on the scene he was predicting drops to 1990's levels. He was adamant that prices would resettle at averages that preceded the run-up in real-estate values and his overly ambitious predictions coupled with a penchant for blogging gave a great deal of people (albeit many financially limited people*) a lot of false hope. On VV he ran up against a lot of opposition from people who had been through Victoria's ups and downs and knew what the local price plateaus were all about.

Perhaps, but I disagree with the implication that locals who have lived through previous cycles have any particular knowledge about how the market might behave in the future. The locals in Seattle also knew that real estate only plateaus there. Until it didn't.

*By "financially limited people" I mean those who would never qualify for a home in this market even with a combined income and seemed to despise those who did. The commentary on HHV's and various other blogs were drenched with undertones of jealousy and negativity directed towards those who were in a position to buy a house, so the blog became as much a bearish take on the market as an opportunity for people to vent among friends. At least that was my interpretation.

Sure, of course there are some people that are just wishing for a $200k house because that's all they can afford. I don't really see the harm in that. You're saying you never wished for something beyond your current financial means? Of course you can't listen to that kind of wishful thinking and confuse it with analysis.

There has been lots of extremely valuable analysis done on the market these past few years. I have a much better understanding of it than I did at the beginning due to HHV, this thread, and lots of personal research (something of a hobby). It has saved us from what would have in retrospect been financially bad decisions (buying a condo to get in the market, and later buying an entry-level house that we knew we would outgrow in 5 years).

[rjag]

I just can't see the market dropping enough to allow a 25 year old on a single income to enter the single family home market? 275k may not be able to buy a home but certainly a decent condo.

Exactly

[aastra]

The main difference being our great depression is marked by people waiting for days in long lines for their new iPhones instead of soup...

That's right. Times cannot truly be tough if tens of millions of ordinary people are comfortable shelling out thousands of dollars per year on disposable toys and their associated costs. The other day I found myself listening to a fellow complaining about the challenges of being "poor" (he used that word several times to describe his situation) while he also pondered if a $75,000 SUV would be sufficient for his simple family's needs. Anyway, methinks Apple's fortunes are not a bad indicator of how comfortable the masses really have. If Apple's revenue starts to dry up then we'll know that people are actually starting to get serious about tightening their proverbial belts.

[MarkoJ]

That's right. Times cannot truly be tough if tens of millions of ordinary people are comfortable shelling out thousands of dollars per year on disposable toys and their associated costs. The other day I found myself listening to a fellow complaining about the challenges of being "poor" (he used that word several times to describe his situation) while he also pondered if a $75,000 SUV would be sufficient for his simple family's needs. Anyway, methinks Apple's fortunes are not a bad indicator of how comfortable the masses really have. If Apple's revenue starts to dry up then we'll know that people are actually starting to get serious about tightening their proverbial belts.

+1

[pherthyl]

That's right. Times cannot truly be tough if tens of millions of ordinary people are comfortable shelling out thousands of dollars per year on disposable toys and their associated costs. The other day I found myself listening to a fellow complaining about the challenges of being "poor" (he used that word several times to describe his situation) while he also pondered if a $75,000 SUV would be sufficient for his simple family's needs. Anyway, methinks Apple's fortunes are not a bad indicator of how comfortable the masses really have. If Apple's revenue starts to dry up then we'll know that people are actually starting to get serious about tightening their proverbial belts.

Maybe Obama can use that on the campaign. Don't worry about the unemployment rate or languishing GDP. Apple is doing great therefore the economy is just peachy!

[true blue oak]

That's right. Times cannot truly be tough if tens of millions of ordinary people are comfortable shelling out thousands of dollars per year on disposable toys and their associated costs. The other day I found myself listening to a fellow complaining about the challenges of being "poor" (he used that word several times to describe his situation) while he also pondered if a $75,000 SUV would be sufficient for his simple family's needs. Anyway, methinks Apple's fortunes are not a bad indicator of how comfortable the masses really have. If Apple's revenue starts to dry up then we'll know that people are actually starting to get serious about tightening their proverbial belts.

No-one ever said that as a group those with the latest iPhones had a great deal of financial acumen. I think many would give up two meals a day before their iPhones.

[aastra]

Maybe Obama can use that on the campaign... Apple is doing great therefore the economy is just peachy!

As long as he doesn't identify which country's economy he's talking about...

[Nparker]

Times cannot truly be tough if tens of millions of ordinary people are comfortable shelling out thousands of dollars per year on disposable toys and their associated costs...

And it's a new toy that really doesn't do anything much better than the toy they were ecstatic about a year ago. Say what you will, but Apple has some of the best marketing going. Of course it helps that the masses are status seeking lemmings.

[Mike K.]

Aastra makes a good point though. The economy is bad for those who rely on the old economy (manufacturing, semi-skilled labour), but it's roaring full steam ahead for those in the new economy (IT, web infrastructure, web-based enterprise). So as far as recessions go this is a very different beast than what happened in the 80s.

[pherthyl]

Aastra makes a good point though. The economy is bad for those who rely on the old economy (manufacturing, semi-skilled labour), but it's roaring full steam ahead for those in the new economy (IT, web infrastructure, web-based enterprise). So as far as recessions go this is a very different beast than what happened in the 80s.

Absolutely. Although the sales of luxury items like iPhones is probably not a good indicator for the health of household finances. Lots of fancy toys were bought with home equity in the US as well.