That new house smell

Ahh the smell of toxic offgassing in the morning.  It’ll knock a couple months of your life but where would we be without new construction?  Probably all living in tent city.

In the end like any market it comes down to supply and demand.  We’ve discussed the disproportionate effect that out of town buyers have on the market as they create demand without adding to supply.  Those buyers are balanced against the sellers moving away or dying.   But of course there is a third factor and that is new construction.  They ain’t making more land but they are making plenty of new little boxes to go on it.

So is construction going to ramp up to even out the market?  Well builders tell me they are crazy busy and waiting for new land to become available to build on.   Let’s take a look at the data.

chart (36)

Nothing too dramatic, although the units under construction in April seems to be ticking upwards.  Might be starting to react to the market conditions and rising prices.   Detached home construction is on a reasonably solid looking upward trend.

For perspective, let’s look a bit further back where we can see the condo boom we had just before the financial crisis.

chart (37)

At the peak in July 2008 there were 2616 condos under construction versus only 1379 now.  No wonder condos languished longer than detached houses, that supply overhang took a few years to work its way through.

In fact – looking at the complete history – it seems specifically condo building booms often coincide with price tops. It happened in 1976, 1981, 1994, and 2008.  So watch out when the builders start going crazy, it could be the top of the market.

chart (38)

Another way to look at it is what percentage of total stock is attached vs detached, which you can play with in the interactive version below.

May 24 Market Update

Weekly stats update courtesy of the VREB via Marko Juras.

May 2016
May
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 320  644 979
905
New Listings 392 760 1082
1485
Active Listings 2533 2499 2431
4043
Sales to New Listings  82% 85% 90%
61%
Sales Projection 1340 1199 1310
Months of Inventory

4.5

Market conditions are completely off the rails now.  90% sales/list is unbelievable in May.    To see how completely nuts it is, just look at the normal range throughout the year.  It doesn’t hit north of 90% until December normally when nothing gets listed.

Sales per day down a bit but that’s probably the long weekend messing with the stats.

Quite a bit of construction popping up around town that I’ve noticed.  Especially single family and townhouse construction seems to have picked up quite a bit to add to the mini rental building boom downtown.  Despite the efforts of our neighbourhood serial arsonist, these units are going to be hitting the market at an increasing rate.  Article on this coming later this week, stay tuned.

May 16th Market Update

Weekly stats update courtesy of the VREB via Marko Juras.

May 2016
May
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 320  644
905
New Listings 392 760
1485
Active Listings 2533 2499
4043
Sales to New Listings  82% 85%
61%
Sales Projection 1340 1199
Months of Inventory

4.5

Just when you thought the market couldn’t get any hotter, it does.  MOI down, sales to list ratio up.

 

And sorry to keep harping on it but what is still completely astounding is that inventory continues to drop.   This is now the fourth week in a row with inventory dropping which is unheard of in May.   Normally inventory doesn’t start decreasing until July.

Taking a look at the sales per day, we see we are still heating up and immediately devouring almost 9 out of 10 new listings that come on.

A rise by any other name

How fast are house prices increasing in Victoria?   It really depends on what measure you use.

For years I’ve been saying that month to month averages are useless and month to month medians are almost useless.   They vary wildly and can jump almost 50,000 from month to month.  Looking at those numbers is a surefire way to lose the forest for the trees.

If we want to measure price changes, we are essentially looking at 3 different options:

  1. Median and average prices – The most direct measure of prices since they are the least processed, but subject to quite a bit of variability.   I prefer the median because it is less influenced by outlying high end sales.  If we want to make sense of these, we need to apply a rolling average to smooth them out.   3 months seems to be the minimum to take out the worst of the noise.  6 months is a good mid point, and 12 months is great for factoring out any seasonality at the price of flattening short term trends.
  2. Teranet House Price Index – The Teranet house price index is the oldest repeat-sale index that we have in Canada.   It uses sales pairs (the same house selling twice) to gauge how prices are changing over time (methodology).   The HPI is published about 2 weeks after the end of each month.
  3. MLS House Price Index – This index is created by the Canadian Real Estate Association and is another repeat-sale index.   Although it’s created by the real estate industry, the advantage is it is much more detailed and can be broken down by housing type and sub-region (although there are issues with that).

Note that median price data for Greater Victoria SFHs starts in January 1988.   The Teranet HPI starts in January 1996 (and is published on a 2 week delay hence no data yet for April), and the MLS HPI starts in January 2005.

Without further ado, here’s the tool to play around with.  Mouse over the chart to change the start and end dates.  It’s also been added to the Tools page.

Note:  if the chart isn’t showing up above, press refresh in your browser.

May 9th Market Update

Weekly stats update courtesy of the VREB via Marko Juras.

May 2016
May
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 320
905
New Listings 392
1485
Active Listings 2533
4043
Sales to New Listings  82%
61%
Sales Projection 1340
Months of Inventory

4.5

Sales up almost 50% over last year still which means we will almost certainly break the all time sales record for the third month in a row.   Inventory down from April which again is unprecedented for this time of the year, resulting in a sales/list that we usually don’t see until the late fall.  Usually sales/list drops at the start of the month (see blue line on chart below) when all the expired listings are re-listed.  Didn’t even budge this month.

Meanwhile the noise continues for the government to do something about the housing disaster in Vancouver.   The article says that 40 academics from UBC and SFU have endorsed the 1.5% non-resident housing tax to the provincial government.   I wouldn’t be surprised if something like this went through, however I also think it would be about as effective as the helicopters dumping their little bags of water on the Alberta fires.   This speculative bubble will collapse when the market loses faith, but heck we might as well collect some money from it while it’s alive.