More months more records. This time it’s sales (highest August ever) and inventory (lowest August ever) which means of course the months of inventory are also at their lowest point.
Meanwhile the single family price continues to flatline. As I discussed last month, I don’t believe in price plateaus in hot markets. With these conditions, prices will increase. However going into month 6 of not much movement it deserves a second look.
To look at what happened last time we had similar market conditions, let’s see about the median prices in the 2000s.
As you can see in both 2005 and 2006 we had extended (6+ month) flat spots as well. This seemed to happen when the market got a little bit ahead of the underlying trend and was resetting. Those flat spots ended with jumps in the following spring.
Year over year, price increases are still north of 15% for detached houses and 10% for condos.
Those price changes are starting to be felt in affordability. The RBC affordability report came out recently and made note of how affordability is rapidly deteriorating in Victoria. “This level (51.4%) exceeded the long-term average of 43.8% quite significantly, which suggests to us the presence of greater than usual affordability stress.”
One encouraging sign is that listings are up significantly this August from years past and almost at the high water marks of 2011 and 2008. If this continues we might be able to avoid the catastrophically low inventory we saw in 2003 when it was close to current levels in August and dropped to just over 1000 by December.
September should see a further drop in sales from August, but there is usually a bump in October. If traffic on the website is any indication, interest in real estate is starting to pick up again after a summer lull.
Meanwhile the regulatory changes keep piling on. There is news that the Quebec Immigrant Investor Program where foreign investors could buy citizenship for an interest free loan of $800,000 (are we that hard up for money in Canada?) is being tightened up. Immigration lawyer Richard Kurland says “Quebec has fixed it. Now you get rejected if you have BC property, if you have a child attending a BC school … immigrant investor cases are being refused.” While it might not hit us as much, it could be another nail in the coffin for Vancouver which is finally seeing some moderation from the foreign buyer tax.
What makes me happy as a taxpayer is the ongoing withdrawal of our government from the insured mortgage business. As seen in the latest bank earnings calls, banks are increasingly carrying uninsured mortgages while being forced to allocate more to reserves and perform stricter stress tests by federal regulators. Now they just need to reduce the government backing for Genworth and Canada Guaranty (so called private insurers that are actually 90% government backed) and we taxpayers should be close to getting ourselves off the hook.’
In other news, I was interviewed by a guy writing an article about Victoria real estate for a Hong Kong and Singapore magazine. The mag bills itself as the “go-to-luxury lifestyle guide for high-net-worth readers”. Now why would they be looking at us?