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.