How has Victoria real estate done in terms of US dollars?

There's an economic meltdown in the US, banks are going nipples north, unemployment seems to be on an unending march upward and ZIRP (Zero Interest Rate Policy) is now reality. The word of the day appears to be deflation (I personally don't think inflation will be a problem over the next 2-3 years ).

One of consequences of the mess in the US, is a relatively strong dollar. Gone are the days of get 3 loonies for two bucks, and it's instead, if you give me 9 dollars US, I might give you 10 loonies today, and maybe less than 9 loonies 6 months from now. I anticipate that the strength in the CAD dollar is likely to continue (while we do have a whole raft of problems ourselves, they do seem proportionately less extreme - for now) over the next year or so, with the loonie likely to flirt with parity yet again. Which brings up an interesting question - what does a strong dollar mean for the Victoria Real Estate market?

I would argue that a strong dollar is likely to reduce demand for Victoria real estate, via three channels.

First, real estate in Victoria for American buyers has become more expensive in terms of US dollars. That lovely Fairfield character conversion (#1 -220 Moss St, 2beds and 2baths) that sold for $455,000 in August 2007, is now listed for $485,000 and had a 2009 assessed value of $418,000. Note it wasn't that long ago that things were going for assessed or less (January and February 2009). So in January, Americans could have likely bought the property for $418,000 CAD, and as of January 2, 2009 could have done so for $345,268 US. Even if the Americans had bought for the fairy tale price of $485,000 CAD ($400,610US) in January, the buyers are now asking $447,073US. That's a 11.6% climb in 7 months.

Secondly, the competition (substitutes for Victoria RE) has gotten relatively cheaper in that same time period. A two-bedroom, 2 bath, house in a nice part of Phoenix (Youngtown, it's mostly retirees - http://www.realestatebook.com/homes/listing/101-538620917/11596-W-Mountain-View-Rd-Youngtown-AZ-85363/) can presently be had for $79,200US with a 30 year fixed mortgage at 6% with payments of $379.88US. As such a Canadian buying the Phoenix property in January would have had to have coughed up $95,884CAD now only has to find $85,919CAD.

Third, a strong dollar is bad for the Canadian economy and bad for Victoria, which relies on tourists. It's likely to push up the local unemployment rate, which should have negative effects on the local RE market.

Hiatus

I must apologize for not posting as of late. I has a bit of a family tragedy (my grandmother, aunt and uncle were all killed in a MVA involving a drunk driver at the end of July in Alberta) and combine it with a family vacation and you've got one long hiatus from blogging.

Now that is passed I hope to post more regularly.