November numbers and a surprising insight into the HPI

November numbers are out, and it’s pretty much as expected.  The trend of an improving market continues unabated, with both MOI and Sales/List continuing along the lines they have been for years now.   The release from the VREB is mostly as expected, expect for an unusal note by board president Guy Crozier.

“The good news for buyers is that pricing remains competitive and there are new listings coming onto the market every day.”

Now why would they mention competitive prices when the market is this active?   Well it turns out the single family house median dropped a whopping 7.4% from October, or $43,500.   Now this is most likely just a random occurrence, but fairly rare given a month to month swing of that magnitude has only happened 5 times in the last 20 years.

Also can anyone explain this graph to me?  The VREB says it is sales to active listings, but calculating that value for November (573/2952) gives 19.4%, not the 25% that they come up with.



Just Jack uncovered a truly delicious tidbit in the comments on the last post which deserves more attention.   As most of you know, the MLS Home Price Index was introduced a while ago to provide a more stable measure of house price changes than the median and averages, which tend to swing wildly month to month (November being exhibit A).  The MLS HPI joins the much longer standing Teranet House Price Index.   Both are based on sales pairs, so that the change in value of the same home can be compared, and thus both are dependent on having enough sales pairs to come up with a stable index value.   In the past we’ve noticed already that the Teranet HPI starts behaving a little erratically once sales pairs in a given month drop below about 150.

Now here is where it gets interesting.  The key difference between the MLS HPI and the Teranet HPI is that you can break down the MLS HPI into house types, and areas.  So for example, one might want to look at single family homes in Gordon Head separate from all other houses and see how they performed.  At first glance this is a sensible option to have, given how different areas can have totally different markets.   The issue of course is that the more you divide your sales, the less data you have to come up with your benchmark home price.

Case in point: The VREB claims that the “benchmark” townhouse in Oak Bay increased in value by $23,300 (4.5% from October to November 2015).  Sounds great right?  That’s an annualized rate of 53%!   Well Just Jack uncovered the truth behind that number.

There were no Oak Bay townhome sales in November. When I say no – I mean there were zero townhome sales. In October there was 1.

In other words, the increase in Oak Bay townhomes as stated in the MLS HPI is 100% pure fiction.  There is no possible way you can calculate a benchmark price based on no data whatsoever.  And by extension almost all of the subcategories by area are total fiction and should be ignored.   I’m no statistician so I can’t say for sure how many sales pairs you need to make any statistically valid statements as to benchmark prices, but we can be sure that number is more than zero, and probably closer to 50.   It’s pretty dishonest for the VREB to publish benchmark house prices that have no basis in fact.

So in case you find yourself reading the VREB news release, feel free to ignore pages 5 through 10, as they aren’t worth the pixels they’re printed on.

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74 thoughts on “November numbers and a surprising insight into the HPI

  1. Threaded comments aren’t working well, IMO. The skinny towers of text don’t make for comfortable reading.

  2. Did a little DD on that shipyard article and it sounds like all bullshit. They are laying off down there right now not hiring. If you note the 350 guys are the cruise ships own people not local guys. More media spin jobs.

  3. Just out of curiosity. As anyone come across a table of historical House Price Indexes (HPI) for Victoria?

    I want to get a deeper understanding of the HPI and to what purpose it may be put? At this point in my understanding the HPI is only a predictor of benchmark property with defined physical and location aspects. The HPI is an indicator of the market performance for that defined property only.

    That information may be good for lenders or economists looking at the big picture to determine potential mortgage defaults but not good for you, me or an estate agent as a factor to determine current value of a home.

    You’ll still need someone to inventory your home for size, age, condition etc. Then have them construct an HPI using your home’s physical and location aspects. That HPI can be graphed and updated over time to determine the value of your home or investment property when ever you need to know it.

  4. Mon, Dec 7, 2015 8:45am:

    Dec Dec
    2015 2014
    Net Unconditional Sales: 124 389
    New Listings: 125 419
    Active Listings: 2,797 3,210

    Please Note
    Left Column: stats so far this month
    Right Column: stats for the entire month from last year

  5. Possibly but by the time they actually get the T4 with a full years wage and the cash saved up, interest rates will be up a point with tighter lending rules and inventory could be back at record supply as in past busts.

    As the article stated, 800 guys for a few months then 150 laid off til who knows when. Most of those core guys of a few hundred already own houses and not everyone is caught up in house porn like the homeowners on here.

    Also many of those are apprentices who don’t make the big bucks and like to spend their cash on trucks and toys with their new found wealth. The seasoned trades guys who have been thru the hard times they are saving their ass off for the eventual down times.

    Many guys come and go along the way as it is a fricking ugly place to work and is why it pays big bucks. Getting stuck in the damp cold bowels of a ship for 12 hour shifts for months on end is similar to being thrown in a dungeon.

  6. Looks like a steady stream coming in. That could be years of steady work at pay that is designed around short term contracts. $$$ all you need is a partner with a steady job, a parent to co-sign, enough cash for a big down payment, two T4s showing good income, or a crooked mortgage broker and you will get the loan. Lots of options for these folks to get the mortgage but not a lot of inventory close by. This puts upward pressure on the core for two reasons. Scarcity obviously but most will buy outside the core making the crawl even worse…

  7. Must be all those laid off oil workers who would fly in/out. Who moves to Victoria to be unemployed ? Then again it could also be new homeless people in town collecting welfare who would be listed as new job hunters.

  8. I suspect that if the Fed rate is raised on December 16, it will be so as to spin it as evidence of an improving economy, whereas in fact, the economy has practically stalled, with the US$ continuing to strengthen, which is keeping inflation low, real unemployment high, and the trade gape growing.

    The problem with ZIRP or NIRP is that it does little to boost incomes of the 90% or the 99%, which means RE can continue climbing only if indebtedness keeps increasing. But any increase in rates, however small, could have a psychological impact, leading to a revulsion against higher indebtedness. In that case the RE market will falter, which in turn will induce an even greater aversion to debt, leading to a self-reinforcing downturn.

  9. Lots of guys pull in 100K at the dockyard. Is your buddy with the Feds full time or the shipyard Marko ? There is a major difference as the latter is never full time permanent.

    If I was a banker I wouldn’t be handing out mortgage money to a shipyard worker unless he was high on the seniority list and could show T4’s for longer than a year. It’s a feast or famine industry where sudden layoffs are the nature of the game.

  10. Good to see the shipyard come back to life but anyone who has worked there knows you live and die by the pink slip on a daily and monthly basis. Very few are full time permanent which banks require for mortgages. Make great bucks to save up but there’s no job security in that place.

    They rotate crews as they need them at different stages of refit, like the 10 day job, then your gone. If you get six months steady in you’re doing the best of the pack. That’s enough to get the EI claim going.

  11. “Next year will be busy as the company is pursuing commercial contracts, O’Rourke said. He expects up to see up to 800 people working, with 150 in offices and 650 trades, in the initial six months of 2016. After that, trades numbers should decrease to 500 core trade workers unless other work comes in. “These are good-paying, blue-collar jobs,” O’Rourke said. – See more at:

  12. ICYMI Mike, the tech industry is one of the worst for booms and busts. Layoffs are starting to show up at places like Hootsuite, and others. Silicon Valley which leads the way is showing signs of layoffs at various places.

    The money has been pouring into tech for years now and eventually it dries up, especially all these private companies that promise big things but investors get stuck and can’t sell out like public companies. Keep the rose colored glasses on but eventually things always head south when the money stops rolling in.

    Benchmark Capital’s Bill Gurley: Yes, It’s Really A Bubble!

    “Also, I’ve lived through crashes and it sucks. I’ve watched companies go from 130 employees to 30 in three layoffs and they want the VCs and the board to come in and tell everyone it’s going to be OK. You sit in on those meetings and they really suck. When these markets correct, they correct hard. There’s no soft landing in Silicon Valley. People take on risk slowly, but then they get fearful quickly. It always happens that way.”

  13. You mean the industry with the massive decline in investment of $200 million the past 2 years and down $100 million the past 10 months ?

  14. I understand the point you are trying to make but you can use a house to retire early.

    I don’t happen to agree with folks who don’t count their home in their net worth unless they are planning on staying put forever and they plan to save an additional $1 000 000 to have $40,000 a year until their pensions kick in. This might be your situation.

    Plenty of people on the MMM forum sell or rent their paid-off house out and go travelling or downsize and retire 10 years early because they have the freedom to do so by tapping into their house equity.

    If your house is currently worth $600,000 in 20 years you might want to downsize – or you might need to for some reason. If you put $120,000 you’ll have $480,000 in principal pay down. If your home appreciates an average of 4% per year it will be worth $1,314,673.89. It would have to be adjusted by inflation, but it is still a significant sum and net is about 1.2 million.

    This provides a lot of options.

  15. 35,000 Canadians lost their jobs last month as we head into another recession. Looks like we’re right there with two other countries with housing bubbles about to explode: Australia and Sweden. Throw another condo on the barbie mate, this baby is cooked !

  16. Guess that’s why Calgary house prices are down 5% and sales tanked 28%. Most industries are tied to oil bizz at some point but as you say the good ole CBC will find the sunny side. Did you see Goldman calling today for another 50% cut in oil price ? Won”t be pretty for the 250,000 construction workers.

  17. Complaining about punishment makes me think you feel you deserve some sort of special reward for having the ability to have a job and save money.

    It’s a statement of fact, not a complaint. It’s not like I invented this theory, it’s just a fact.

    A 500 000 house gives you 20 000 a year tax free with only 100 000 invested

    No, a house gives you that. The price of the house doesn’t factor into it. Only the equivalent rent matters.

    Anyway we are arguing by each other here. I’m not even talking about whether it’s a good idea to rent or buy, just that increased house prices are a detriment to anyone wanting a decent return on their money and isn’t interested in real estate investing. As someone who follows MMM I thought this would be clear to you. Say you need to save $500,000 dollars in investable assets outside your home to support your lifestyle and your primary residence costs $200,000, then you need to save $700,000 total. If the primary residence costs $500k then you need to save $1M total. i.e. you need to come up with an extra $300k to get to the same point.

  18. That is surprising that only 7% of Albertans work in oil/gas/mining.

    I suppose Edmonton’s employment did grow 4.0% in the past year. Not quite Vic’s stellar 6.3%, but still not too shabby.

  19. Round & round we go… with a third of all Canadians now in their twenties & early thirties, it’s easy to see that average Canadian debt-to-income levels will continue rising as those millennials take on mortgages. I suspect the ratio will start rising similar to the steepness of ~‘03/04 on your Huffy chart, and I know you’ll be here when it does with another “nasty chart” to try and scare us.

    Otherwise we’re about the same debt-to-income as S Korea… middle of the pack, yawn…

  20. Now there’s a nasty chart. Might explain some of the “reduced” and “new” prices I’ve seen the last few days. No wonder consumer credit has slowed to the lowest levels in a year, they must be almost all tapped out.

    Canadian Household Debt Growing At Fastest Pace In 3 Years: RBC

    The increase in mortgage borrowing comes at a time when questions are being raised about the strength of the Canadian housing market. While Toronto and Vancouver remain hot, other markets have started to feel the weakness in the economy.

  21. Higher unemployment again in Victoria, new job growth topping out,triple the estimated unemployed in Canada, oil tanking, mortgage rates moving up, Victoria core homeowners made a screaming $400 last month…..yep, it’s tough being a bear. 😉

  22. So what are the job growth categories ? Real stats only thanks, not hypothetical financial planners and chef’s jobs. Low paying tourism, restaurant and big box stores jobs which are the norm in this town don’t buy houses, they stay renters. Government isn’t expanding and there are no new high paying industries starting up besides the 90 odd jobs on Viatec which many are only entry level $20 an hour jobs.

  23. Gold markets are responding by forward looking in anticipation of Yellen’s justification for the rates to continue to go up as their economy grows, while ours tanks. Oil on it’s way to $35 by the looks of things.

    So all that job growth is from the unemployed levels going up ? Makes sense. Not. I thought all those rich tech workers were buying up places with their huge incomes and not renting ? Spin baby, spin.

  24. Vic employment growth is up 6.3%!!! (10,800 jobs)

    That’s huge, in case you missed the exclamation marks…lol
    Van’s 3.8% is admirable, but we’re leaving them and the rest of the country in the dust.

    Lots of those 10.8k will be newcomers and renting for only 6m to a year so things are starting to align for a humdinger of a Spring (…the one thing that’s not aligning to break records might be sales since inventory is remaining so tight)

  25. It was the most up-to-date chart I could find in 10 seconds or less (i didn’t stop it) …and yes the correlation has broken down a bit lately but I was merely trying to show Hawk what’s going to happen when it starts taking off again (btw my fave horses are NEM & GDX).

  26. Charts look identical, now we know the top is in. Immigrants ? Apparently hardly any Syrians want to come here.

  27. US jobs numbers up big, looks like the interest rate hike is a lock. OPEC opening up the taps more and oil down, who woulda figured ?

    Victoria unemployment numbers edged up again to 6.3 from 6.1, and up from 4.7 in February but why worry right ? Just a 10 month up trend. 😉

    Even gold is popping it’s head up the last couple of days in response to an inflation hedge in the US.

  28. I happen to be a saver myself and don’t feel punished by low rates or high prices. There are always opportunities in any market. What you choose to do with your savings is up to you. Complaining about punishment makes me think you feel you deserve some sort of special reward for having the ability to have a job and save money.

    A 500 000 house gives you 20 000 a year tax free with only 100 000 invested. In your case you’ve had 45 000 of appreciation over the last year if this was your purchase price. You have a suite so your costs should be on par with renting yet you are pAying down approximately 12 000 a year in principal. You are ahead 57 000 net a year on that 100 000 leaving your remaining 400 000 to invest otherwise and bring you an extra 16 000 a year.

    A house meets all the criteria of the financial definition of investment. It appears that you have your own definition because you’ve decided, presumably, that you are never going to sell or get a heloc so the roi is not to be counted.

    I don’t think that your analysis is logical but I’m fine if you only apply it to yourself.

  29. Just looking at the number and with a month to go we’ve already broken the all time record for SFH Total $ Volume.

    2015 YTD December 1st – $2,610,707,921
    Previous Record 2016 – $2,526,197,164

    2011 – $1,883,871,995
    2012 – $1,753,787,811
    2013 – $1,836,618,579
    2014 – $2,102,839,378

  30. Other ways it might be viewed are real long-term economic security

    The house provides that irrespective of price.

    net worth

    A number that does nothing for you.

    rental value equivalent

    Set by rental demand and not home prices.

    HELOC, reverse mortgage

    Not interested in those.

    and, of course, tax exempt capital gains, the option of translating it into cash in your pocket and buying smaller in the same city or renting.

    Like I said, when you don’t sell, the value is completely immaterial.

    $500,000 in investments gives me ~$20,000/year in income. A $500,000 house gives me exactly the same thing as a $200,000 house in a cheaper market. Except I will have to take an extra $300,000 from potential investments to pay for it.

    Low interest rates punish savers. One way they do so is by lowering the return on fixed income investments. The other way is by inflating the prices of real estate due to low rates on the debt.

  31. Using your Van chart, thought you might interested in this correlation…

    Btw, when I say parabolic for Van, I mean something more along the lines of gold 1979 and the Libs are more pro-immigration than Cons…won’t that lead to higher prices?

  32. That is a privileged way to think about it.

    Other ways it might be viewed are real long-term economic security, net worth, rental value equivalent, HELOC, reverse mortgage and, of course, tax exempt capital gains, the option of translating it into cash in your pocket and buying smaller in the same city or renting.

    If you want to forget about appreciation on the biggest leveraged investment you’ll likely make in your life go ahead. Doesn’t change the fact that it is an investment that gives you all sorts of choices someone without it does not have. That you choose to sit in it unproductively is your own choice, not one I would make.

    Let us know the outcome of your personal rent v. buy calculation including any suite income so far and then project it forward 20 years vs. being a renter and we’ll see whether you really just have a place to live.

    IMO a house exactly fits the definition of investment as “a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price”.

  33. @totoro

    How is a home a non-productive asset when we have a historic rate of appreciation of at least 4% and leverage is available and commonly used?

    Because appreciation doesn’t do me any good if I am living in the place. What difference does it make if my house is worth $200,000 or $500,000 or $1,000,000? None whatsoever unless I sell it and move to a much cheaper city. So forget about the appreciation when thinking about return. The only real return is either suite income or avoided rent, and then your net return is pretty bad.

  34. Can’t open the top one Leo but I get the gist. It’s all good my man. Justin has a grip on things after seeing the damage Harper has left him, and will cool this sucker down pronto. 😉

  35. OK Hawk, you know I’m just having fun teasing you, so here are two bits of news today on your favourite topics of the economy, bonds, rates, etc… One is positive and the other is negative. These articles should get you twisted into a granny knot!!!



  36. Don’t mind Mike. He’s just come out of the “Delusion” zone and stuck in the “New Paradigm” world, but soon to be in “Denial” mode come the new year. It’s not 1986, it’s 2015 and commodities just broke their 40 year support line.

    Mike’s chart does remind you of Vancouver’s housing parabolic chart. With HAM leaving sunny Sydney in droves, it won’t be long til they bail on rain drenched Vancouver. I’m sure Justin has some plans to clamp down on the money laundering in his old backyard. I hear they don’t like islands either. 😉

  37. I wonder if the graph is eluding to a particular psychological event such as the Olympics or the rise in unemployment when the construction phase for an Olympic event is completed.

    For most cities there has been a fall in house prices after an Olympic event. But for Vancouver there wasn’t any significant reduction in employment as the private sector continued to hire people to build condo towers.

    Such as housing in China, as long as you keep people employed building condo towers real estate prices will remain stable. Once you stop building then prices decline.

    Built it and they will come – stop building and they will leave.

  38. I’ll be the first to join the 10%+ correction in 5 years camp IF for instance we see Van hit annual gains of 40+% in the coming years, ie. manic phase. Even though I wish markets like housing weren’t subjected to our manic nature, I’m nearly convinced we have to see that range of parabolic steepness before Van tops (often called a blow-off top). It becomes more human psychology than anything at that point…as the following graphic eludes to. The bear trap period would be ‘11-’13 following the Olympics.

  39. Depending on the intended use of those estimates this approach is reasonable. In this case it is just a press release dumbed down to the lowest common denominator of reader.

    If someone then uses those estimates for another purpose it’s their own fault. I doubt that any developer will make a decision on a multi million dollar townhouse project in Oak Bay based on one press release.

    What the press release may do is encourage a buyer or seller to hire an agent. And that agent would then provide a market evaluation for the seller or develop a relationship with the buyer.

  40. tell me if this is stupid

    1/ index for land values, should be quite easy $/sq ft
    2/ index for building values $/sq ft

    then add the 2 and you can have a benchmark by type/size/etc…
    lots of work, but with all the data on MLS this should be pretty quick.

  41. U.S. fixed-income giant forecasts Canadian real estate correction

    “U.S. fixed-income giant PIMCO is maintaining its bearish view of Canada’s housing market. Ed Devlin, who heads up Canadian investing for Pimco, told BNN the firm expects a 5-to-10 percent drop in home prices over the next five years.

    “If you think about that in real terms, adjusting for inflation, that actually gets you to a negative return of about 20 percent,” said Devlin.

    “What we’re watching very closely for the Vancouver market is some of the reforms going on in China in terms of clamping down on capital flight and corruption,” he said. ”

  42. I still think we’re overlooking how HPIs have been developed to deal with such a case.

    “For example, there may be a combination of characteristics for which no properties have been sold. A hedonic regression model developed using the available data allows the average house price to be estimated for each possible combination of characteristics in the absence of such data.”

  43. I’ve been thinking about this as well and agree that the increase in benchmark price for OB townhouses with zero sales and no corresponding increase in the benchmark price for SFH prices in OB for the same month seems unreasonable. It would be interesting to hear from those responsible for this calculation as to the basis for the price increase.

  44. The sophisticated technique means they make a reasonable guess relative to other types of strata homes in other parts of the core.

    So how much of the HPI is guess and how much of the HPI is a sale supported estimate?

  45. Years ago, the firm I worked for was asked to submit a bid to calculate benchmark house prices for CMHC. Of course this was passed from desk to desk until it landed on mine. I studied the proposal and how CMHC wanted those calculations performed.

    In some cases they were asking to determine a benchmark detached house price for an area built up with condominiums. The thing about developing a benchmark house price is that it is hypothetical. As long as the benchmark estimate was reasonable it was acceptable and no one could prove you were wrong in your estimate of the benchmark house price in say Coal Harbour because there were no detached house sales.

    The bad news was that there was no data. The good news was that there was no data to prove the benchmark estimate was wrong.

  46. The difference is that the lowest numbers of sales pairs in recent history of the Teranet for Victoria was 112 in April of 2012. I’m ok with believing you can get a good single measure from 112 sales. No way can you get anything but garbage with zero sales.

  47. “100% pure fiction. There is no possible way you can calculate a benchmark price based on no data whatsoever.”

    Unless they’re using implied values like the Teranet when sales data gets too low (ie. OB townhouses in Nov).

    See the HPI example on their methodology page.

  48. Yep. In retrospect it should be obvious that the data is nonsense, but it didn’t occur to me until @JustJack pointed it out. The example of zero sales leading to a 4.5% increase is particularly laughable, but even if there were a few sales the number would be conjecture.
    The overall MLS HPI is likely fine, and perhaps a breakdown into core vs westshore and peninsula has some value, but anything more fine grained than that is probably not possible.

  49. I’ve changed the comment preferences to put new comments on top. I’ve left the threaded comments for now and increased the maximum reply depth to 5 despite the votes for a linear system so we can give this a try. Also since people have been heavily using the threaded reply features, changing it linear now will make previous discussions turn into an unreadable jumble. Let’s give this a try, and I’ll see if we can highlight new comments as well.

  50. It is shocking and even more so that our lame ass local media never question anything and keep pumping out whatever they are told to keep advertiser dollars. They’re all salesmen at the end of the day.

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