Vancouver Condo Prices

I've been working in Vancouver this week. Reading the article in today's Vancouver Sun about Vancouver condo prices and how high they can go, got me thinking.

My first thought was that the gentleman from Genworth Financial is delusional. He claims that supply and (non-quantitative) demand will keep the average condo price in Vancouver rising for the next 5 years. VHB went off on the logic behind his argument.

My second thought was "Of course!" Vukanovich is going to say that prices will keep rising due to his vested interest in the rising prices of condos. If I were selling widgets, I would say that my widgets were the best widgets in the world, that they will always go up in value, and that there will always be very high demand for my widgets. I profit from the sale of my widgets. This guy, directly or indirectly, will profit from the sale of high-priced condos.

My third thought was, hmmm, maybe I've been reading too many bear real estate blogs. Have I become delusional? Or am I now seeing the light? I believe that I am seeing the light, but only the future will confirm this. If prices keep rising forever, I guess I just jumped on another bandwagon, like Y2K and the Calgary Flames.

If Vancouver condo prices were to keep prices for the next 5 years, will Victoria's also? Do Victoria's prices follow Vancouver's prices? Or vice versa? What, if any, is the relation or correlation between Victoria and Vancouver?

Being relatively new to Victoria and BC, it appears to me that Victoria lives in Vancouver's shadow. Vancouver is the big brother, Victoria is the little sister. I may be entirely wrong. If not, how does this get reflected in real estate prices?

Average SFH Prices - non-CPI and CPI Adjusted

I've gotten into a Saturday morning routine where I quickly get up, make a pot of coffee, sit down in front of the MLS website, and glean it for all it's worth. However, MLS.ca was down this morning. So, I devoted myself to making a couple of handsome graphs of Victoria's average SFH prices over the years. The graphs actually aren't too handsome, as I have not yet figured out all aspects of pictures and links in a blog. I've got some homework to do.

Single Family Home average selling prices were taken from the Victoria Real Estate Board website. Here - http://www.vreb.org/history/GRAA2006.pdf and here - http://www.vreb.org/history/YE782006.pdf

As numerical data wasn't given for the years prior to 1978, I looked very closely at the historical graph to get values for 1967 through 1977.

The following graph is based on average SFH selling prices, not taking CPI inflation into consideration. My graph should look the same as the one from VREB, with color cues from VHB and OHB.

The graph nicely shows that, over time, RE always goes up. Of course, during the down turns, or RE market crashes, that may not appear so believable.

A better graph of average home prices is one where prices take inflation into consideration. Using the same average home price numbers, and the CPI values from the Bank of Canada, I calculated new average SFH prices.

I had CPI inflation values until 1975. For 1967 through 1974, I used CPI values that were averaged from 1975 to 2006. Taking CPI inflation into consideration magnifies the price declines during the early 1970s and the mid-1980s. It appears that from 2002 till the present, we are definitely above the norm for average SFH prices.

Based on these graphs, where are SFH prices going? Have we reached another peak, with a down turn coming to bring us into line with historical norms? Or will prices continue to rise indefinitely?

Unfortunately, as I was manipulating my graphs to make them somewhat more eye-catching, I closed Excel without saving my data. I had assumed I had previously saved it. I had not. Thus, I will, in the future, go through a spell of deja vu as I recreate my spreadsheet. At that point, I'll have data to prove the graphs.

The American, er, Victorian, Dream

Today's Times Colonist had an article on the dream of home owernership in Victoria, titled "Dream of owning a home slipping out of reach".

Ok, this is not something new. I think that a lot of people, myself included, who did not get into the market 5 years ago, have been feeling this for some time. The subject in the article is quite typical of many people. Her situation is compounded by being a single mother. She would have to travel back in time to 1991 in order to buy a house for the mortgage that she qualifies for (assuming she has a 25% downpayment). Last I checked, time travel had not yet been perfected.

I've lamented to my father, who still lives on the prairies, numerous times over the real estate prices in Victoria. His response is that I should suck it up because I live in the California of Canada. I guess that this is true. If someone moaned and complained about real estate prices in Malibu, California, would we feel sorry for them? I doubt it. I wouldn't. Move somewhere else!

I think that the "move somewhere else" philosophy may soon start applying to Victoria, Vancouver, etc. If current real estate prices are here to stay, and increases in wages do not follow, then us renters will have to re-evaluate our life priorities. Which is more important to us - home ownership or living in Victoria? As in the Demographia survey, there certainly are less expensive, more affordable, places to live! Regina, Winnipeg, Quebec City! In those cities, a single mother, or father, or any single income family can afford a home.

And there are places closer to Victoria than Regina where affordability is better - Campbell River, Ladysmith, even Duncan. A new 1600 sq. ft. townhome in Duncan can be bought for just over $220k. A steal of a price compared to Victoria.

It looks like if the current prices in Victoria or here to stay, we'll be renting for some time, or moving elsewhere! How about you?

Victoria's Affordability

Having read portions of the housing affordability report from Demographia, I'd question the median house price number that they used for Victoria. But, this may be splitting hairs. I'm not sure how they obtained the median house price for 2006, but I took the average of the median for every month, and found that to be $445000 for Greater Victoria. Based on the same median income (that number does sound right), it produced an affordability number of 7.96. This number would put us at #12 on the least affordable. This isn't totally accurate, as Vancouver would still be higher than Victoria. With the US market the way it has been this past year, their numbers are still probably the same or close. So, we are even less affordable! Like we didn't know that!

I plotted the chart for the monthly medians for 2006. What can be drawn? Maybe that the median for Victoria went all over the map, but not really anywhere. The median for the CRD appears to have gone up and is coming down.

January 20 Week Ending Stats

Beginning last July, I started to compile some statistics through the MLS.ca website. I know that this is not the best source for stats, but they should at least point towards trends. I would much sooner know the sell prices than the listing prices, but when given lemons, make lemonade. My stats are all based on the Victoria region for Vancouver Island (includes Sooke through North Saanich).

The first graph looks at listings of 2 bedroom condos, 3 bedroom townhomes, and 3 bedroom single family homes. I hoped that by following the trend of listings inventory, and with a little help from the supply and demand principle, it would be possible to make a guestimate on the direction of prices. These curves are very similar to the stats given by the Victoria Real Estate Board. High inventory during the summer and fall, with a decrease during November and December. It appears that we may have hit the inventory low, with numbers now starting to rebound over the past couple weeks.

I was also interested in the breakdown of listings of all single family homes in different price ranges. Above is the current percentage of SFH in the noted prices ranges (in $000). There's not much below $300000. There's lots above $700000!

I also thought it would be interesting to follow the trend of listings price breakdown over time. This graph would hopefully reveal either the trend towards higher or lower listing prices. So far, I would be hesitant to draw any conclusions. With the seasonal decrease in listings, any conclusion would only be speculative.

It will be interesting to follow the numbers this spring and then heading into summer. If Victoria follows the pattern of a number of American cities, we should see continued higher than norm listings. It would only make sense that prices should drop, but I seem to always have been incorrect in previous predictions about the local real estate market. This Prairieboy is still attempting to understand the west coast home market!

Are there any predictions out there?
Where will listings numbers go?
How about prices? Up? Down?
Buy now, or wait?

Construction craziness

I went for a drive today through Langford and Colwood. It was specifically to see the development around Bear Mountain and the Latoria area of Colwood. Despite being socked in by fog on Bear Mountain, I was blown away by the amount of construction and development that is taking place in those cities. When the amount of construction taking place in Victoria is added to this, the construction statistics for our quaint little region must be quite impressive. Does anyone out there have numbers on housing starts and completions for the CRD? Another interesting stat would be what the size of the construction labourforce is today, and perhaps, what the historical norm is. Anyone know where to find these tidbits of info???

As I drove home, I was left wondering "Where in the world are the people who need to buy these homes gonna come from?"

I know, Alberta, Vancouver, Asia, Europe, etc. But really? That many to Victoria?

Another thing is that there continues to be a lot of homes in Langford and Colwood that languish on MLS for what seems to be an enternity. Condos even more so. Citiwalk condos in Langford has had "Only 5 2-bed, 2-bath Units Left!" for months and months already. I think they better up the antee from their last promotion of a $1500 gift card for Mayfair Mall. Based on the number of condo sales in December and the number of condo listings currently in Langford, there is 11 months of supply. To sell a condo today, you'd really have to raise the bar.

I've been compiling numbers for Victoria from MLS for a little over 6 months. I'll be revealing them tomorrow. Stay tuned!

Encouraged to wait...

Last night I was out for dinner with some friends. Of course, the topic of real estate in Victoria came up, as it so often does. One couple described the craziness that surrounded their house purchase just over a year ago. How at the peak of the selling frenzy, it was sheer panic to put in an offer as soon as possible. They looked back now and wished they had not rushed quite as much as they had. But they felt there was no alternative. They are now left feeling some slight buyer's remorse, wishing they had not paid so much for a house as small as theirs. They said that my wife and I are in a great position. We can now take our time in finding the right place because the craziness is over. I'd agree that things have calmed down, but prices still appear to be as high as they ever are. A more relaxed market does not necessarily mean that it has become more affordable. I think we all know people who have had thier house on the market for months and months, and who will sooner not sell their house than to lower the price. To me, this seems very greedy, unless of course, you don't really need to sell your house.

Wouldn't it just make sense that prices should start falling in Victoria, due to the supply and demand argument? They appear to be dropping in Vancouver already, as witnessed through VHB.

Maybe I am the greedy one in hoping that prices decrease in order for me to get a piece of the action.

Average income = average house???

My wife and I are average in a lot of ways. We have 2 cars, we want 2.4 children, we're average in size. There isn't much out of the ordinary with us. Income wise, we're above average. We are both quasi professionals, so together we make about 20 - 30k above the average family income. We have no children yet, so we are doing alright. However, we have also not plunged into the Victoria housing market. Prior to my moving to Victoria from the Prairies a couple years ago, I owned a home in a bustling Prairie city. I was single at that time, making about the same money as I am now, and had no problem paying my mortgage.

The house I had bought was around $90 / square foot!

Fast forward to today. My wife and I would really love to purchase a home. We're tired of listening to our neighbours rap music, hearing mice scurry within the walls, and feeling like we can't have friends over for dinner because our space is a little tight. And we're not in a bad place! We live close to Cook Street Village and pay over $1100 / month.

We plan to use the maximum we can from the "Home Buyers Option". Our downpayment for a home should be acceptable. The problem lies in the future monthly payments. We're planning for children in the next year or two, so our income will be reduced to one and a bit. A mortgage for a townhouse in this city, with our downpayment, would be around $300 - 350k. Mortgage payments would be nearly $2000 a month. I'm puzzled as to how we could afford this with our situation. I don't think we can.

If you're a first time homeowner, perhaps with a young family, how did you do it?

Do you sleep at night with a mortgage that is larger that the GDP of some countries?

Am I going to have to either: a) get a 2nd job, b) sell my baseball card collection, c) win the lottery, or d) all of the above?

Maybe this is our new reality. Thanks.

Welcome!

Well, this is a start of a new blog dedicated to the discussion of the housing market in Victoria and the Capital Region District. As I have become a big fan of all blogs relating to the current housing situation in Canada and the US, I wished there was a blog dedicated to my local housing market. There was a Victoria housing market blog last year, which I frequently religiously. However, it is no longer operational. Hopefully, this blog attempt suffices as a replacement.

Lots of discussion in the future will be great!

Enjoy!