June numbers are out and I’d say they turned out surprisingly strong. Let’s take a look at what happened last month starting with the bullish news and working our way down. First of all, prices for the market as a whole continue to trend up across all detached, condos, and townhouses.
The months of inventory at 1.6 still falls into what the market summary considers “ludicrously hot” (MOI under 2). Despite several individual signs of cooling (we’ll get to that), the overall market shows no particularly convincing signs of slowing down. If we look at the trend, in a cooling market we should see a gradual deceleration of price gains. Instead of that we are seeing steady increases or even continued acceleration. For example, in the last two quarters we saw the 12 month rolling price medians increase as follows.
|Q1 2017||Q2 2017|
|Median Single Family House||+$9712 / month||+$12,237 / month|
|Median Condo||+$5170 / month||+$5076 / month|
How many people here are able to save $100,000/year? Not me. That’s why this silly price appreciation has to moderate if we think that local house prices should be supportable by local buyers in the long term. Even if we accept that as the city grows, detached houses in the core will be affordable to an ever shrinking segment of the population, at this rate of appreciation that segment will tend towards zero rather quickly. Right now only the top 25% of local households could qualify for a mortgage on the median detached house with minimum down (it takes a household income of about $150,000 and some $68,000 at closing).
I’m on vacation so I’ll have to cut the analysis a bit short on this one. Here’s a pile of graphs
Months of inventory for June still tied for last year as the lowest ever. Don’t be fooled by the turn upwards at the end there, that is just curve fitting.
As for the rest, inventory is lower than it has been in any of the last 20 Junes. Sales are the second highest on record, and new listings coming in at around the high third of historical June numbers.
Where’s the weakness in the market? Well months of inventory have flatlined and are no longer continuing to decrease. This is as low as it’s going to go. Sales to list ratio is backing off from the highs reached a few months ago.
Inventory is also trending up a bit recently although not nearly as much as it should be this time of year. There are 1365 Realtors in Victoria and exactly 1358 residential listings. So if you’re selling, don’t be afraid to negotiate folks!
And then there’s the core. If I look around Gordon Head I see more and more listings sitting on the market and not selling. Same goes for Oak Bay. There is no denying that the hottest markets are slowing down. Then there is the recurring theme of flat median prices for detached homes in the core. I’ve previously rejected this as noise (how could there be flat prices in such a hot market?) but it keeps coming up so let’s take another look.
Assuming the MLS HPI can be trusted (more on this later), it doesn’t look all that flat based on that measure. The median prices are wildly volatile which we know, and the massive spike of the median to $900,000 in January makes all subsequent months look like prices aren’t increasing anymore. As always, if I’m missing something here, let me know in the comments.
Of course this might all be yesterdays news. Rates are going up (maybe even for real this time) and we’ll take a look at what that will do to the affordability picture in a future post. Much more importantly, a change in government means the industries funding/corrupting the party in power has also switched and with that we can expect a change in priorities. If you ask me it would do BC good to be just a little less real estate obsessed for a change.