As mentioned earlier today, the MLS HPI index is down again for detached homes. This has made the VREB press release somewhat more somber than we have been used to recently. The market is confusing, and of course that means there is a need (more than ever apparently), to engage a local REALTOR®. Which raises the question: what kind of market would allow one to buy without an agent? I suspect we may not live to see that recommendation in a press release.
No matter, back to the numbers. With inventory and new listings essentially unchanged from a year ago, sales are down 18%. Inventory is still desperately low (lowest on record for September), but it’s about 4% higher than it was in June. An increase in inventory in that period is very unusual, having not happened since 2008. However just like we saw the HPI index take a similar breather in 2006, we saw the same increase in inventory going into that fall too, so it is certainly not a surefire indicator of impending doom.
While the index languished, median prices for both detached homes and condos hit a new record this month. The core detached market is languishing still, essentially flat from August and down $50,000 from the record high in January, but it seems the rest of the market is still rising enough to drag everything up.
If we smooth out the variations we get a bit of a better picture. Is it just me or are we getting to truly dizzying highs above the last plateau?
Months of inventory are up from last year, but only by about 0.4.
Of course, the market is quite different depending on the sector. Surprisingly enough, in the core detached market where prices have been stagnating, months of inventory are actually significantly lower than on the peninsula or the westshore.
Westshore detached homes are even reaching into balanced market territory. However as you can see, the entire market is being kept very active largely by condos, which haven’t slowed down at all from last year. One might think this is because people have been driven out of the higher priced single family homes, and there is a desperation to get into the cheaper properties. However in detached homes, the most active segment is the middle price tier, not the lower end.
Going forward, it is somewhat encouraging to see an uptick in new listings. Now that the frenzied bidding wars are mostly in the past and the TC is not filled with stories of Vancouver buyers flooding onto our shores, I hope that more people will be enticed to list their homes.
The big wildcard out there is still the OSFI stress test which will force everyone to qualify for new mortgages at the posted rate (some 2% higher than what you would be paying). With affordability getting quite stretched even at today’s very low rates, a large increase in qualification requirements may sideline a lot of buyers. They won’t have to pay those rates so it’s not quite the same as interest rates going up that much, but they will have to convince the bank that they could.
What do you think? Is our current breather in SFH prices just that or is it the beginning of the top? Will the condo market be decimated by the new mortgage rules? Will the new small business tax changes destroy the economy as some think and throw us into a recession? Are there too many damn gradients in these graphs?