September Monthly Preview

Last month we saw the HPI index take a surprising dip after an extended period of increases.   Well early numbers show that this has continued this month, with a small decrease in the detached index while condos continue to increase.

Looking back at the short history of the HPI (only goes back to 2005), we can search for precedent of price declines in a market that is supposedly “hot”.   Back in 2006, we did have a similar period of several months of declines in the index despite market conditions still indicating a sellers market.

At that time it turned out that prices were still 18 months away from the peak which was 20% higher.   We’ll see what happens this time around, but I want to see much more broad based weakness in the market indicators before I would be confident calling a top or correction.   Sales are down 18% from last year with otherwise essentially identical inventory and new listings, so it is clear that demand has dropped significantly but we still need more properties available before price gains can be halted for good.

Full report on the month coming tonight.

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8 thoughts on “September Monthly Preview

  1. I think we still need more selection before people will want to trade up or down in larger volumes. I expect inventory to creep up and prices to redistribute more equitably before home owners decide to list in substantially greater numbers.

    I would also expect bridge financing to increase as well as foreclosures as prices continue at a slow decline and recent gains in prices are rolled back. I also expect construction to slow and unemployment in the finance, insurance, real estate industries to rise.

    Increasing months of inventory, increasing new listings relative to sales and increasing days on market. Pretty much more of the same as we had this year.

    These would by my predictions for the foreseeable future of say six months to a year assuming no significant changes in our economy.

    @#@#@ or the artist formerly known as John Dollar

  2. Sales are down but inventory is not growing, which suggests that (a) those who might downsize, are reluctant to do so, and (b) those who might move up market are reluctant to do so. Why?

    For those who might downsize but don’t, the reason is surely that they think real estate without a mortgage is a better bet than either cash, which earns a negative real income, or bonds and stocks, which entail a high risk of loss at a time when interest rates are on the rise and both bond and stock prices are abnormally high.

    For those who already own a home and have paid off most or all of the financing and might, therefore, move to something better, why now when the benefit of a better home comes at what would be for most a burdensome cost, and when home values are declining?

    There is a certain logical inconsistency between those two positions but psychologically both make sense, which means we could see continued price declines without a substantial rise, or even any rise, in inventory.

  3. Funny how the core benchmark.price can be exactly what is was a month ago. No wonder many don’t trust the numbers VREB pumps out.

  4. Greater Victoria: SFH Average = $884,196, SFH Median = $795,000.

    Is there a recent graph of monthly medians for the whole area? I know there was a chart of “core” medians a few posts back.

  5. Did you miss your checkup Mike ? Last week you were strong Vic RE bull flip flopper. Now you’re wamby pamby.

    The new stress tests coming should push things over the edge in classic bear market fashion as few would be able to take a 3% hit right now. Reality is such a major wake up call.

    Via Garth:

    “As bad as that is, it gets worse. RBC expects four more Bank of Canada increases in the next 15 months, plumping mortgages a full 1%. Add in the stress test for a 3% bump – almost doubling the current five-year rate of just over 3%. That single-point mortgage increase will worsen affordability by 3.5% across the country and double that in YVR, says the bank. “This would occur at a time when housing affordability is already stretched in some of Canada’s largest markets.”

  6. Thanks for the monthly preview, Leo.


    If you truly believe it’s “just the halftime show”, it’d be near madness to do otherwise.

    LF, even though I think Vic sees decent returns next couple years, there are better places to put new money now… some of them are in this index.

    Many Canadian markets have been in a funk this year and I believe are now opportunities. Heck, even something like Boardwalk REIT (prairies & quebec RE) might perform better after its recent rout.