Calgary vs. Victoria Real Estate review

I just spent 2 weeks visiting friends in Calgary.  While there, I reviewed the Real Estate market in what is widely regarded one of the Nation's strongest markets and a thriving economy.  How does Victoria compare in sheer Real Estate sales numbers?  See below- first, let's review the July 2012 local stats to date.


Victoria Real Estate sales statistics, July 30 Month-to-Date

MTD July 2012

Sales                         481

Listings                     1114

Inventory                  4939

July 2011

Sales                         523

Listings                     1374

Inventory                  5094

At best, we'll closely match the sales number of July 2011.  A very interesting result to the month considering how strong it started off.  Let's also remember that the market started improving about this time last year so very soon comparing stats to 12 months ago will be of little value.  We expect the numbers for the rest of the year to match 2011 figures.  Stats which cause pondering are the total inventory which for once may finish below July 2011 and also the fact that new listing numbers are on the decline.

Calgary vs. Victoria Real Estate Review

Several years ago, I attended a spring Real Estate conference in Calgary which seemingly had very few local attendees. The reason was the market was white hot, with properties selling the moment they were listed and Agents scrambling to serve their clients.  Multiple offers were the norm and prices rising daily.  

Fast forward to today.  Every Canadian market saw correction in 2008/2009 with virtually all property values now slightly below the peak of 2007/2008.  In the case of Calgary, the average price for a single family home is around $480,000 or about 5% below the 2007 peak.  In Victoria, the average single family home is now $606,000 or 3.4% below the peak of 2010.  

Peak of 2010?  Most presume prices peaked in Victoria before the 2008/2009 crash but prices did indeed rise afterward and have adjusted little.  Strange town, our little Victoria!

As a native Victorian, I appreciate all of the amenities a city like Calgary has to offer.  Great food (fresh oysters 1000km from shore, anyone?), shopping and entertainment are just a start.  As a parent, I also marvel at available family recreation including rec centres, sports, lakes and skiing not far away.  With a Metro population of 1.2 million vs Victoria's 340,000 it's easy to see that the town has a vast audience to serve.

While in Calgary, we typically stay in a suburb called McKenzie Towne- about 20 minutes from downtown in moderate traffic (an hour during rush hour!).  It's a lovely place with a fine mix of detached homes, town homes and condos and serviced by its own sizeable Town square with Sobey's supermarket, banks, churches, restaurants & pubs, and so much more plus walkways and easy proximity to 130th which has requisite box stores such as Home Depot, Rona, London Drugs and Sport Chek.  To me, it's a fine example of what Westshore should be and likely will be once Victoria's transit issues are addressed.

Calgary area Real Estate statistics are very intriguing.  Take a look below, compared with Victoria:

Calgary June 2012

Sales                        2200

Listings                     3312

Inventory                  5712

Victoria June 2012

Sales                         637

Listings                     1449

Inventory                  5189

Some observations:

• With over 3 times Victoria's population, it makes sense that Calgary generally has just over 3 times the number of monthly sales
• The number of new Calgary sales relative to new listings is low:  a ratio of roughly 1:1.5 versus Victoria's 1:2.3. There is much more "churn" in Calgary's market.
• Most alarmingly, Victoria's total inventory level is very high relative to Calgary's- in fact, it is not far off a city triple it's size!  There is an 8 month supply of Victoria listings (total inventory divided by sales in the month) versus Calgary's 2.6 month supply.

Other observations:

• Calgary sales are currently about 16% above last year yet prices are up only about 4%
• Even with Victoria's massive oversupply of properties, prices remain stable with a minuscule 0.34% drop in its 6 month average

You are likely asking yourself:  With such an oversupply in inventory, why haven't Victoria prices tumbled?

The reality is, many of Victoria's current listings will not sell just based on sheer numbers.  While sales continue, it is just a clear indicator that most properties are priced beyond what the local market will support.  Whether these are sellers simply speculating, Agents who take listings just for something to post or a combination of both, the reality is that many current listings need not be on the market.  Even when compared to Calgary, a strong but by no means "white hot" market, the number of Victoria listings should be closer to 2000, not 5100.

In comparison, the number of monthly sales relative to population is appropriate.  This is especially impressive when considering Calgary is a growth town with increasing population and many economic attractions.

I've said this countless times before:  Victoria has a diverse economic makeup.  We are not a "One Industry" town, rather one which benefits from net migration as a result of :

-Government

-Tourism

-Military

-Lifestyle (weather, anyone?)

-Education

-Technology

Those who are waiting for significant price drops will be disappointed.  If you are in the market for a home, do yourself a favour and buy now while inventory is high so you can move in sooner and enjoy home ownership!

What is exactly is happening in Victoria Real Estate??

July 23, 2012 Victoria Real Estate Board statistics Month to Date

MTD July 2012

Sales                          371

Listings                       857

Inventory                   4900

July 2011

Sales                          523

Listings                      1375

Inventory                   5094

From the stats above, sales in Victoria seem to be doing just fine.  All may not be as it seems, however. The statistics from last week, July 16, reported 258 sales so far in the month meaning there were only 113 sales for the week- in other words, July started strong but has slowed.  Even the number of listings is coming in slowly, at just 857 currently versus July 2011's total of 1375.

Just what exactly is happening?

Those who have read my posts before know I am not prone to "doom and gloom" reporting.  I have, in fact, been criticized for an annoying positive outlook (I learned this from Googling my own name!) although strangely my assessments tend to be congruent with market trends and results.  So here's my opinion about the current market:

Sellers

Don't dispair.  Properties DO sell.  Even though above I've said "only" 113 sales transpired in the past 7 days, that's still 16 sales each day on average.  The key is that not every property sells.  Just because a property is listed on the MLS system does not guarantee a sale, as is evidenced in the weak listings-to-sales ratio this entire year.

In a strong seller's market, we were accustomed to seeing 5-10 viewings per week (or more) until a sale transpired weeks later.  Today, the sale still comes weeks later but traffic can be as little as 1 per week or every 10 days.  A reminder that heavy traffic does not guarantee a sale.

The key to sell today is and always remains price.  There is no amount of marketing, promotion, packaging or agent effort which will overcome an overpriced listing.  In today's market, being anything less than sharply priced will result in a long market time and worse- an expired, unsold listing.

Also, price reductions after 30 days or so on market have little effect, as do reductions in small increments ie. $5000 steps.  This is a market where a seller literally has to venture into a totally different price level in order to succeed.  In other words, there's no point going from $565,000 to $559,000:  it is wise to drop to the next segment which is $549,900.  Your next step would be a potentially painful $525,000 so best find that sale sooner rather than later.

So, price your property correctly from the start for an expedient sale at top value and beware of Agents competing for your business by quoting high or unrealistic pricing.  You really do need to be the first sale in the area, otherwise other sales at lower prices will set your maximum achievable value.

Watch our YouTube video "Pricing your home"

Buyers

How much cheaper can interest rates become?  Many overlook the opportunities now available for the very first time.  You are experiencing record low interest rates combined with high inventory + great selection = ideal buying condition.

Seize the day and go ahead with the purchase of that property which ticks most of the boxes on your list.  I can't tell you how many times I've seen in the past 21 years people regret not acting on a purchase just because they thought better opportunities lay ahead.

By the way, just because inventory is high and prices softer doesn't mean sellers are compelled to take massive losses on their properties.  We received an offer last week 20% below list price!  Guess what:  in almost every case, if a seller can't get what they need to move (i.e. paying off their mortgage and other fees), they'll simply decide to stay.  Just because you made an offer doesn't mean the seller is obliged to either accept it or work with it.

There is a chance that whatever property you buy will devalue slightly over the course of time (ever heard a Real Estate Agent say that before?) but one thing is for certain:  as long as you need a place to live, it makes sense being your own landlord.  The longer you live in your home, the less the effects of the market will have on you.  Even if values go down 5% (BTW it has not gone down more than 5.5% in any given year in 25 years- values reduced in only 5 annual periods for detached homes since 1988 ranging from 0.04%-5.47% vs 9 annual periods of double digit growth), your loss is only on paper as long as you stay in your home.  PLUS- low interest rates mean less of your payment goes toward interest so your principal is being chipped away quicker than before.

Don't let pride stand in the way of your next move.  I'm not suggesting you overpay for a property but rather don't waste your time seeking steals or giveaways.  This is Victoria after all and there are many reasons why we remain the second highest priced Real Estate in Canada.

Watch our YouTube video "How much of a price discount can I expect?"

and "I want to wait until prices hit rock bottom

Buyers who need to Sell first

This is the third and often overlooked demographic in the marketplace.

Unlike your first home purchase, you are now burdened with the fact that you need to sell your home first in order to free up equity to purchase your next home.

Do yourself a favour and avoid "subject to sale" offers.  You need to realize that with such a condition in place, you have no negotiation strength whatsoever and even worse- the "Time Clause" aspect means at any time the seller can sell the property to another party without your ability to defend  your position.  The very best you'll have is 24, 48 or 72 hours to decide if you will step away or if you have the resources to continue.  And if you had those resources, why didn't you utilize them to begin with?


Always sell first for these reasons: 1. you'll know exactly how much money you have to spend, 2. you will be in a liquid position and in a strong negotiation position, 3. you will not live in fear of someone else snatching your dream home just because you couldn't act fast enough.

As mentioned above, the reality is you may need to take less for your home than expected in order to move upward in today's market.  Statistically, consumers buy 50% upwards meaning those selling their $400,000 home buy a $600,000, those selling their $600 buy $900, etc.  If statistically prices are down on your $400,000 home, they will be on your $600,000 purchase as well.

Watch our YouTube video "Buying Up in a Down Market"

Summary

I have said many times in presentations, seminars and reports that people do not move because the market says so or solely because of market conditions.  People move because something in their lives can be made better by a change in address.  Growing family, retirement downsize, changes in family dynamic: these are the reasons why people sell and buy.

Watch our YouTube videos:

Buying Up in a Down Market

Home Buyers: Buy using your head or with your heart?

Market Timing

How changes in mortgage rules will affect your buying power

TonyJoeRealEstate on YouTube

Housing Market favour buyers: Times Colonist

http://www.timescolonist.com/business/Housing+market+favours+buyers/6881507/story.html

From the Times Colonist July 4, 2012

Headlines are meant to draw attention.  For some reason, this particular article generated far more calls from clients and past customers than any other in recent past.  "Is the market taking a nosedive?" asked a friend.  "Sounds like prices are tanking" said a client.

In particular, this article pointed out the drop in average sale price of single family homes from $622,387 in May 2012 to $591,464 in June 2012.  It was $629,292 in June 2011.  Sure does sound like a major drop!

Facts and figures can be interpreted in many ways but it is important to understand the basis of the numbers.  Average prices are skewed any given month by the number of low priced or high priced sales.  In March of 2006, two $10 Million dollar sales caused an increase which showed a spike of $40,000 in the average price.  Also, it is important to review numbers based on a time frame i.e. over 3 or 6 months, since one single month is not an accurate indicator of activity.

A good indicator comes from the man/woman "on the street":  what is going on with Real Estate Agents?  Have they seen multiple offers, are their listings getting traffic and activity, are they needing to adjust prices, what is their average days on market to sell, etc.  What is Buyer motivation?

Even when such headlines are released, people still buy.  Why?  Because something in their lives requires a change in address.  I've said many times before people don't buy homes because the news tells them its a good time.  Changes in finances, family, job and other factors cause people to move- regardless of the market.

Are we scared?  I think I would be if we saw an overnight drop in prices over 10%.  Since 1988, there have only been 5 periods of downward price movement, with a range between -0.51% and -5.37%.  This includes the nasty economy of 2009!  I think we're doing just fine, thank you.

www.tonyjoe.ca