APS 2012 - Housing market in military driven communities

[McG]

An collection of anecdotal observations seem to be suggesting that APS is suffering some troubles this year in comparison to past years.  It appears a series of incidents of are stagnating traditionally fast moving military housing markets (places like Petawawa, Oromocto, Shilo, etc).  I suspect the fallout will be significantly higher rates of IR and unaccompanied than past years.  I'm curious if others are seeing this, or if it is just perception.

The first big kicker was the one month delay in posting messages to coincide them with budget time announcements.  This delayed the start of "house selling season" in both big cities and military communities, which in turn delayed when people started selling and going on HHTs.  Then, all three brigades held brigade level exercises and I am told that within one of those brigades there was direction (either from fmn level or unit level) that nobody would be doing an HHT until everyone was out of the field - this period of busy activity further delayed personnel going on HHTs into military driven housing markets.  This retardation of buyers into military driven markets has significantly slowed sales, and other factors are exacerbating.

Many of these "military driven markets" (hence force "MDMs") are sustaining unsustainable house construction industries.  The size of the bases is either stagnant or increasing only marginally, yet year after year new arrivals are coming in a choosing to build houses instead of buy existing houses - eventually (if we're not there already), supply exceeded demand and every new house built by a military postee equates to a military family being unable to sell themselves out of their home.

... and to further drive down these MDMs, the approach of July seems to be inspiring some (seemingly unaware that they can go unaccompanied and (hopefully) move the family later in the summer) to throw-in the towel and request IR.  Much like the sustained unsustainable house building, this also equates to one more military family unable to sell themselves out of their home.

As I said at the top, maybe this is just perception.  I know that a lot of big city housing markets are depressed at the moment, but they still seem to be moving.  Is anyone else seeing that the "MDMs" seem to be relatively dead this year?

 

[Sprinting Thistle]

This describes the situation in Petawawa this year accurately.  Agents are indicating that this year, sales are 10% lower than last, and last year was lower than the previous year.  Having just sold in Pet, after languishing on the market for some time, I can attest to the facts of your post.  Further, I have a number of friends who have yet to sell and are still waiting for an offer. 

Construction in Petawawa continues apace with plans for another hundred+ units next year. 

I would be interested to hear other experiences.

 

[SeaKingTacco]

The only thing that I would add as an observation is, that, in places like Gagetown and Petawawa, there is a significant retiring military population that every year more or less permanently removes housing from the market.

You need to quantify: does that effect outweigh new construction that happens each year?

 

[PuckChaser]

So much for the military not wanting to compete or inflate the local economies...

 

[Strike]

So much for the military not wanting to compete or inflate the local economies...

Is it the military inflating the local market? Or is it military members doing it by being determined to sell their house for more than they bought it for because 'that's what's supposed to happen when you buy a house.'

A friend of mine, upon learning he was moving back to the area, noticed the house he had previously lived in was up for sale.  The current owner had done nothing to the house and had jacked the price up twenty grand even though the market in that neighbourhood had remained the same.

 

[PuckChaser]

Could be people are just dumb and will pay whatever someone asks for a house which drives up the local market.

 

[dapaterson]

Could be people are just dumb and will pay whatever someone asks for a house which drives up the local market.

It's less that people are dumb than that they are under time pressure - one week for the HHT.  Realtors know that, and leverage it to their advantage.

 

[captloadie]

I believer that the situation has several aspects. Why are more families taking the risk of building new? Why are members buying houses in places like Shilo and Pet for 300K+? Because the banks offered them really cheap money and the realtors said that houses only ever go up in value. So when markets don't increase, mentally, many members are not prepared to take a loss. We also say things like, well, if you can't sell in three/four years, you can always go on IR.

My personal opinion is that taking a loss on your home isn't reason enough to grant IR (as opposed to going 6 months unaccompanied). At some point we all must take personal responsibility for our finances and not blame the military.

I think we will see in the very near future that in some military communities the real estate market is nothing more than a big ponzi scheme that is ready to crumble. 

 

[PuckChaser]

It's less that people are dumb than that they are under time pressure - one week for the HHT.  Realtors know that, and leverage it to their advantage.

Unfortunately all that pressure is caused by the inadequate, expensive and lack of PMQ housing on most bases. If people had another option other than buy, we wouldn't have the military housing boom.

 

[captloadie]

It's less that people are dumb than that they are under time pressure - one week for the HHT.  Realtors know that, and leverage it to their advantage.

That being said, with the MLS and modern day comms, a week isn't as short as it used to be. I had 12-14 houses all ready to look at on the day I arrived for my HHT, and then addded in another 5-6 after reevaluating what was available. Although, I left my wife back in Europe, which does greatly speed up the process 0:

 

[Popurhedoff]

Having retired last last year in Pet, there were 600 other members retiring that month as well,  not sure how many were staying in the local area but to most of the people I talked too they were staying in Pet, which adds to less houses on the market.

To add to this, the speculation of a new unit being formed or moved also drives up housing prices.  I was witness to that when a new unit moved to Shearwater in the early nineties and when that unit moved to Greenwood two years later.  In both cases the real estate prices started climbing almost two years before the move. A decade later the unit was disbanded and the housing market crashed.

One of the previous owners of my house were discussing this topic last year, and know what he paid for the house, what I paid for the house and what it is assessed at now is more than double of what the original owner paid.

My Wife and I were planning to sell our house in Pet and buy in Gagetown so that she could be closer to her family but have since decided against it.  It would cost us double for the same style of house, we decided to pay this one off first, maybe the market will be better in the future.

To also add to this is that the average price for a house (cross country) is now 330K. A lot of communities use this figure to artificially inflate the values in their communities and we are stupid enough to pay. The housing market is artificial, the economy is weak, but prices continue to climb, interest rates are low, and there is a chance that when the economy strengthens and interst rates climb, that we would have end up not being able to afford our houses, thus creating another housing market crash, north of the border this time.

Cheers
Pop

 

[Good2Golf]

MCG, in some locations, there is also the effect of local builders building "on spec" to a spec of their own, based on their own perceptions of what the market will bear in terms of supply and demand.  Petawawa is a good example; on news of CSOR's creation, many builders started churning out houses for the "hundreds and hundreds" of soldiers and their families, only to realize that the unit had not stood up over night with its end-state manning levels.  The results was a glut of spec homes without a matching number of buyers.  Confucius once said that those who do not learn their history are fated to repeat it -- let's  replace CSOR with 450 Squadron and watch the exact same thing happen in Pet.  Builders: "But the Department said there was going to be a Squadron with hundreds and hundreds (~400) personnel..."  Realistic evaluation: "Yes, arriving over the next half decade..."  Petawawa is a specific situation, with its own challenges, but much of what the builders (or more accurately the small group of families who appear to represent the majority of economic influence in the region) decide to build is not based on a detailed/profound assessment of the actual housing needs of the community, but rather their perception (not always often right) as to what the market is willing to bear.  Those with a house that is close in specification to the "spec home" style that builders are flooding the local housing market with will continue to face a challenge when it comes time to sell.  A good plan for home ownership in the Pet area would be to buy something that meets your families needs while being "unique enough" (in a desirable way) to not have many competing sellers.

:2c:

Regards 
G2G

p.s.  The inclusion of availability of rental properties and PMQs into the local area housing issue is plays a significant role in what shapes a member's chosen housing course of action, and when proportionately low, influences that members towards the oft-glutted single home market.

 

[McG]

The CF could answer the question of which housing markets have unsustainable, military-driven growth.  In managing all the files for postings and Intended Place of Residence on release, we should know what we are moving into & out of a community in a given year, and we should also be able to calculate which percentage of military housing sales are dependant on military buyers (ie. the CF should be able to identify those occurances where it moved a military family out of one house, and then moved another military family into that same house). 

In theory, CF could be monitoring military driven markets in order to raise an alarm when military driven development is unsustainable within the community.

 

[Sprinting Thistle]

I conducted my first HHT in Petawawa in 1997.  At that time the most expensive houses were located in The Forests at a whopping $124,000.  The townhouses on Victoria Street were being built at that time at a new sale price of $74,900.  Today, those same houses in The Forests are selling in the mid 300s with newer builds going for 400K and the townhouses are reselling for 250-ish.  2005 - 2006 saw a huge upswing in sales and building.  In fact many houses were sold in bidding wars between prospective buyers.  I believe that in Petawawa we are now seeing a down turn that will only continue next year.  As I stated above, I have a number of friends still waiting to sell.  The builders have saturated the market and there does not appear to be an easing of new construction. 

 

[dapaterson]

That being said, with the MLS and modern day comms, a week isn't as short as it used to be. I had 12-14 houses all ready to look at on the day I arrived for my HHT, and then addded in another 5-6 after reevaluating what was available. Although, I left my wife back in Europe, which does greatly speed up the process 0:

Unfortunately, that level of preparation is the exception, rather than the rule.


And PMQs are not a solution.  The CF should not be in the residential real estate business if it can at all avoid it; too much grief and expense, to say nothing of the social isolation that it can breed.

 

[bridges]

While I'm retired from the CF & not subject to postings, the anecdotal comments here pretty much agree with my own (aghast) reading of rising house prices, both in MDMs and elsewhere.  House prices in our rural agricultural community in eastern Ont., within commuting distance of Ottawa, have approximately doubled in the last 5-7 years.

We're planning to keep renting until we find a burst bubble in a place where we want to own - waiting decades, if necessary.  Meanwhile, life goes on and we're happy to trade off the lack of equity for fewer headaches and more recreational time.  Not to mention easy portability in the event of layoffs, & needing to move for a job elsewhere.

It's a personal choice, dependent on individual circumstances.  For us, the risk of being house-poor or stuck with something priced over the market is just not worth it right now.    I feel for people stuck in the middle of it though.  The days when you could get lucky & make $200K pulling out of Chilliwack seem a long, long way in the past.

 

[GAP]

Do what a lot of property managers/owners/landlords do......attend bankrupcy auctions.....it's amazing what deals are available on properties on these auctions......

 

[bridges]

Do what a lot of property managers/owners/landlords do......attend bankrupcy auctions.....it's amazing what deals are available on properties on these auctions......

Hmm, interesting.  Where do you see those auctions advertised - in the local paper?  I'd be curious what kind of shape those houses are in.  Sounds worth checking out. 

Alternatively I was thinking of buying a place with an attached rental suite, to help with the mortgage payments - and maybe serve as an apt for my parents at some point - but I'm leery of the apparent headaches of renting.  Not every tenant is as nice as me.    Nor their cats as well-behaved. 

Heard a call-in show about home ownership over the lunch hour today, and am now more convinced than ever that there's no urgency to get back into the ownership stream anytime soon, in some of these inflated markets.  In many cases you'd be "buying high", with no guesses as to what the market will do next.  This is a bit removed from the OP's point about military-dominated markets, but still interesting context.

 

[GAP]

I just did a quick google on auction houses in Manitoba and this little tidbit came up

AUCTIONS BY LOCATION
http://www.manitobaauctionguide.com/auctions-by-location-b-1.html


This is probably a good read also

How to Buy a House at Auction
http://www.ehow.com/video_4985267_buy-house-auction.html

 

[armyvern]

...

I think we will see in the very near future that in some military communities the real estate market is nothing more than a big ponzi scheme that is ready to crumble.

The taxfree tour money in certain MHM certainly played into the current situation as well. Tax-free tours and a roto coming baack here with all that extra cash?? Prices in some of those markets went up hugely as sellers took advantage of the tour cash in their own greed. It was predicted on this site, that when the tax free tours dried up, Ptes and Cpls simply wouldn't have 30 000 grand in their pocket for a down payment anymore for a damn mobile home and that those mainly military market areas would experience a crash. Those money earning tours are, for the most part at those rank levels ... non-existant right now. The pers who did have tax-free tour money to pay the inflated prices then, now don't want to "lose" when they sell either so inflated housing prices still exist in those locations ... and people aren't biting now.

My old home was 300K more expensive a mere 15 years later at one of those "99% Military" market locations. I checked it out on MLS a couple years ago - Squat was done to it, but someone bought it. Wow. That lad will either A) lose his shirt when he tries to sell it, or B) will have no choice but to retire into it.

Because, for 392K now ... I can build modern, efficient and brand new. Guess where my money would go.