March numbers are out and things aren’t getting any better out there. Let’s look at the headline numbers for sales, inventory, and new listings.
- Inventory is at a record low. We’ve never seen a March with this few listings available for sale. Nevermind the dregs.
- New listings are about average. A bit below average perhaps for this time of year but not catastrophically low. With all the stories about how people are afraid to list their houses, it’s good to keep some perspective. New listings were significantly lower every March from 1996 to 2005.
- Sales are down 17% from last year, but still abnormally high. We are off the huge sales pace from last March, but it’s the second highest on record. Last seen at this level in March, 2005.
It all adds up to months of inventory at record lows and the resulting predictable effect on prices.
With current residential MOI at 1.3, we are well below the previous low point.
I don’t want to be accused of hiding the current price movements behind processing, so let’s see the unadulterated picture of how prices are reacting to the low months of inventory.
Without smoothing of course, monthly prices are a variable mess, and routinely increase and decrease by many tens of thousands of dollars from month to month. As usual we want the signal not the noise so we look at the last year of data to discover the trend.
With the current trend lines:
- the median single family home is increasing at about $7,600/month.
- the median townhouse is increasing at about $2600/month.
- the median condo is increasing at about $3300/month.
That’s bad news for everyone given the rate of increases are more than many monthly salaries. Of course this can’t go on forever and eventually the market will slow down. But for what reason? One of the ways it might slow down is if the foreign buyer tax is expanded to the whole province and the Home Partnership Program is cancelled to stop goosing the market for first timers. Another way is if confidence in the market bursts (due perhaps to an exposure of market fraud that’s been at a low boil in the news). Or it might just burn itself out when buyers come to their senses and can’t reach any higher.
One thing that might help us dig out of this mess is more supply coming online. We don’t talk about this much but looking at the data, we are getting close to twice as many units under construction right now than in years prior. That supply is going to help with market conditions, but remember a good chunk of those will already be gone in pre-sales.
What do you think? Will new supply rescue us from this market misery? Or will the demand side withdraw first?
|The HHV Meetup is happening on April 7th at 6PM at the Penny Farthing. I have a reservation for 20 people which is about as many as are signed up. If you can no longer make it, please remove your name from the list or email me so I can adjust reservations closer to the date. Thanks!|