Each month the Victoria Real Estate Board releases data on sales in the area. I have just been looking at the data for January 2009 and it looks really, really bad. I think we can not officially say that the Victoria real estate market is the worst that it has ever been.
People involved with real estate are professional optimists. Everyone from the agents through to the home inspectors to the mortgage specialists and even CHMC is pretending we are not in our worst market. They can not admit how bad it is.
You can also see more stats at this page. People should be concerned.
Quickly looking at the headline numbers, only 138 houses,62 condos and 36 townhouses or mobiles sold in January. That is only 236 sales. In 2006, 07 and 08 the numbers were 440, 383 and 409 respectively. Traditionally January is the second worst month of the year for sales, December being the worst, but the numbers from last month indicate a crash is underway. January, like October to December already showed, is more than 40% off of where sales have been in last years at the same time of the year.
My prediction is that we will see something in the order of 4200 housing units sell over 2009. This is a volume that is comparable to sales levels in the late 1970s.
This is further complicated by too many houses coming onto the market. January saw five times a many units come onto the market as sold. That is the worst ratio we have seen in years, likely decades. The next worst was in Oct of 2008 at just four units on to the market for each one that sold, Sept 2008 and Nov 2008 saw ratios of over three to one.
So what does this fall in sales mean and large number of houses on the market mean? Much lower prices. The prices in Greater Victoria have a lot farther to fall.
Condo prices are at the same level they were in the fall of 2005. If you bought a condo at anytime after August of 2005 odds are the net worth of your unit is less than when you bought. About 7000 condos changed hands in that time, almost all of those transactions involves someone that is not financially worse off for buying. This assumes that prices will not fall further. I expect the average condo price to fall below $200 000 by the end of 2009.
In general houses are doing better, but the latest averages mean only people that bought before the early spring of 2006 are likely to have seen an increase in value of their house. Though I see them also falling further during 2009. I see the prices falling to around $400 000 be the end of 2009, though I would not not bet against $350 000.
The region wide stats hide some variations. Esquimalt and Oak Bay are doing better than other areas whereas the city of of Victoria is doing worse. Saanich East is still doing well whereas Saanich West is not.
We have about 1300 real estate agents in Greater Victoria. In a normal year they should expect to be on one side or the other of close to 12 sales each. 2009 will see them average a bit more than one every two months. Worse than this is that their commissions for each sale will be lower. In 2007 the average sale was worth $7500 in commissions to the agent. In 2009 this will drop to $6700. In 2007 the average gross earnings for an agent in Victoria was $86 000 in 2007, in 2009 it will be about $43 000. Their gross earnings will be cut in half but their expenses will not be down from where they were.
By the end of the year I would expect to see a third of the real estate agents to retire - I expect most of the older ones to fade away. I also expect a lot of the newest people to quit because they will not be able to make any money.
There are still some real estate agents who will still be doing well, one of them is Andrew Holenchuck. He is with Re/Max Camosun for only a short time but he seems to have knack at selling houses. If I were selling in this market, he would be my first choice.