November is 2008 is the lowest level of sales in nine years, the last month lower than this was December 1999. It would not have taken much to be the lowest level in 20 years. I expect December, January, February and March to all be lower than November and be the lowest sales months since 1985.
House prices are down a lot from the peak, we are 15% off of the peak in general terms and 20% in some neighbourhoods. We are now back at the price levels from the spring of 2006. To make this clear to everyone, if you bought a house after the spring of 2006, your house is now worth less than what you paid for it.
Condos have an even harder fall, we are over 20% off of the peak. We are back at prices from March of 2006.
In November three times as many residential properties came onto the market than sold. We have a 16 month supply of properties on the market at the moment, a year ago this was a five month supply and in November 2006 it was a four month supply.
So where are prices going? A lot farther down. The trend from the last few months is that there will be a lot fewer sales in 2009. In 2007 there was a total of 7878 residential properties sold, in 2006 it was 7032. For 2008 we are looking at about 6300 sales, a 20% drop from 2007. October and November 2008 are both down more than 50%.
Realistically the Victoria region will see the sale of between 3400 and 4300 residential units in 2009. It will take until 2010 for the current stock of units on the market to all sell. A lot of residential properties will come off of the market, but these people were all planning on trading up, so them being out of the market will further depress sales.
Here are my predictions for average house prices by 2010:
- Single Family Homes Overall - $340 000
- City of Victoria single family - $325 000
- Oak Bay single family - $565 000
- Saanich East single family - $380 000
- Saanich West single family - $285 000
- Esquimalt single family - $275 000
- Westshore single family - $265 000
- Central Saanich single family - $390 000
- Sidney single family - $260 000
- Condos overall - $200 000
- City of Victoria condos - $200 000
- Vic West condos - $275 000
- Oak Bay condos - $250 000
- Saanich East condos - $225 000
- Saanich West condos - $175 000
- Sidney condos - $290 000
- Westshore condos - $160 000
The 2009 sales will be on a par with sales in the late 1970s and early 80s. We had a lot fewer people in the region at the time. 2009 will see total value of sales comparable to 1999, or about 60% less than in 2007.
In 2007 real estate agents earned about $120 000 000 in commissions, in 2009 I see that being around $42 000 000 to $47 000 000 and lower in 2010. Over the next year about half the real estate agents will either retire or find a new job, even then the remaining ones will be hard pressed to make a good living. A big hit is going to come in real estate advertising as the agents drop all non-online marketing. This will hit the local papers heavily and will be an impact on BC Transit (all those smiling people in ads at bus stops).
Home inspection will not suffer nearly as badly as the real estate agents. Home inspections for a while were something people agreed not to do because they we were making offers without subjects. I can not see anyone buying a house now without an inspection.
Anyone that put down more than 25% for a house that they bought in the last three years should manage to retain equity in their house. Many of us will experience a period of negative equity in our house till 2013 to 2015. The negative equity will put a squeeze on family finances as people will not be able to borrow against their house for renovations or as a family safety net.
People with negative equities that are more than their annual income will become major risks for bankruptcy.