Sept 26 Market Update

Weekly stats update courtesy of the VREB via Marko Juras.

September 2016
Sept
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 104  241 422 608
704
New Listings 108 363 621 844
962
Active Listings 2011 2061  2079 2060
3478
Sales to New Listings  96% 66%  68% 72%
73%
Sales Projection 732 767 760
Months of Inventory

4.94

I’ve said before that inventory should be falling this time of year, but that’s not actually accurate.   Inventory typically stays steady August to September as sellers with overpriced garbage hang on for one more month before pulling their listings until the spring.   Starting in October we should see a sharp decline in inventory if you can imagine it going any lower.

chart-8

Just a reminder, even in hot markets, sales cooling off in the fall are perfectly normal.  Taking the last hot market of 2002-2006, we can see that sales typically decline by about 22% from the hottest month (May) to September, and a further 33% from now until December.   Not once have I seen a year where the market forces were able to overwhelm seasonality and keep sales high into the late fall.

Sept 19 Market Update

Weekly stats update courtesy of the VREB via Marko Juras.

September 2016
Sept
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 104  241 422
704
New Listings 108 363 621
962
Active Listings 2011 2061  2079
3478
Sales to New Listings  96% 66%  68%
73%
Sales Projection 732 767
Months of Inventory

4.94

Inventory slowly creeping up but we’ll have to wait a few more weeks to see whether this is anything of significance.   Normally at this time of year, inventory decreases, so it seems we’re bouncing around near the bottom of what can be sustained as inventory.

Currently we are on track to exceed last year’s sales numbers by about 10% or so which will probably be just barely short of the September record set in 2009 when the market was roaring back from the collapse of the financial crisis.   Despite seasonal slowdowns that are visible by fewer lawn signs, I don’t see too many signs of a change in the market yet.

By the way, the province appointed a new superintendent of real estate to take over the previously self-regulated (i.e. not regulated) Real Estate Council.   While it might take a couple months, I suspect Mr. Noseworthy will be eager to show action on this front well before the provincial election with additional regulatory restrictions on the industry.   As we’ve seen in Vancouver, those are the real wildcard that can sweep the legs out from under any market no matter how hot.

HAC

The Bank of America recently said that Canadian house prices are cheap, if you happen to be buying them in American dollars or Chinese Renminbi.    As we know, buyers from the US and China may be a whopping 1.5% of buyers here in Victoria so clearly this finding has a large impact on us.

Nevertheless, our poor loonie has taken a beating in the last couple years, and it is interesting to see whether the bank’s claim that “Homes are cheaper on both a U.S. dollar adjusted and Chinese renminbi basis than in 2010-2014″ holds up in Victoria given our recent price acceleration.   So here are our detached house prices in Canadian and American dollars, as well as Chinese Renminbi.

usdcny

Surprisingly they seem to be correct and current prices in those currencies are below the levels of most of 2010 to 2014.  Again, not that direct foreign buyers are much of a presence in Victoria, but maybe there is a larger group of locals that earn in USD and have benefited from the currency divergence.

Do you think the value of local real estate in foreign currencies has any relevance?

Rates up, prices up?

Remember when the VREB tried to tell us that the government might raise rates to stimulate the economy?  Well it’s time to examine another interest rate theory that seems to come up often.  Courtesy of Michael, this has been posted several times with the hypothesis that prices go up when interest rates go up, which is somewhat counter to the intuitive notion that higher interest rates will dampen prices because they reduce affordability.

Fundamentally I do agree with the idea that hard assets do well in times of inflation, but looking at the chart above there are also many times when interest rates and prices are dropping together.  If we look at how mortgage rates changed compared to how prices changed across the whole period, we can get a better idea if rising rates are correlated with rising prices.

changefit

Now here we do see a (very weak fit) positive correlation that indicates that rising rates may happen at the same time as more quickly rising prices.   However this doesn’t mean that rising rates somehow cause rising prices.  It’s much more likely that a strengthening economy, better employment, and higher wages lead to both price gains and increases in interest rates.

The low R^2 value means the data is about useless for any predictions (see our jump in prices this year while interest rates declined).  I also think that fundamentals like affordability have a much greater effect than movement in rates, and affordability is looking increasingly strained in Victoria.   Continuous regulatory tightening in the mortgage market will also push up lending costs without any improvement in the economy which will throw a wrench into this already weak theory.

Anyway, back to the data courtesy of the VREB via Marko Juras.

September 2016
Sept
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 104  241
704
New Listings 108 363
962
Active Listings 2011 2061
3478
Sales to New Listings  96% 66%
73%
Sales Projection 732
Months of Inventory

4.94

Still 40% less inventory than last year but the sales rate is now virtually identical, just 4% ahead of what we saw last September.

The Vancouver data is pretty grim though.   The board is going to have a very tough time spinning this at the end of the month.   Even the brokers are getting very nervous and advising their Vancouver clients to extract their equity while they still can.

Sept 6 Market Update

Weekly stats update courtesy of the VREB via Marko Juras.

September 2016
Sept
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 104
704
New Listings 108
962
Active Listings 2011
3478
Sales to New Listings  96%
73%
Sales Projection
Months of Inventory

4.94

The long weekend means this is really only 2 days of data so the numbers can be mostly ignored.    Sales and listings should both pick up as we get more data.   Inventory still critically low, the lowest level we’ve ever seen in August.

Looking at the data coming out of Vancouver, I can’t see it’s looking overly catastrophic yet.  Sales are down, but so is inventory.  Sales/list in the same range as before the tax.   I suspect we will see a quiet period where sellers hold off listing to see what happens while buyers hold off buying for the same reason.   Eventually someone will crack, but maybe not until the spring market.