Quick tour through the board stats: January 2011

It’s that time of the month again.  Let’s dive into the monthly board stats and see how things are shaping up.  The board press releases can be found by clicking on the city name.

Victoria

Residential sales totaled 339, a decrease of 19% from last January’s total of 418.

Active listings rose slightly over December’s numbers to sit just under 3300 units.  This represents an increase of 15% over last January’s inventory total of 2800 units.

Perhaps most tellingly, the sales-to-new inventory ratio hit the lowest level since the market crash-induced buyer strike/seller panic of January 2009 with only 27% of new inventory being absorbed by sales for the month.  This is well into buyer market territory.

Meanwhile, price action was mixed.  The board release chooses to compare month-over-month prices since it puts the best spin on things.  However, to be fair we should compare year-over-year changes to eliminate the seasonal variation in prices.

The average single family home has shed nearly 50K or 8% since last January.  That’s a monthly loss of over $4,000 in equity.

The average townhouse is down about 5K since last January (-1%), while the condos, the lone bright spot, managed to increase about almost 10K (+3%).

The average transaction price all aggregate sales in January 2011 was $485,476, down 4.7% from $509,514 in January 2010.

Bottom line:  Things are not looking good for Victoria.  Inventory rising relative to sales at the fastest pace since the depths of the financial crisis should be like a massive flashing warning light.  Prices have already fallen year-over-year.  Expect this trend to continue.

Vancouver

It’s euphoria in the ‘best place on earth’ as detached house prices in Vancouver hit their all time highs at a ridiculous $1,144,537.  But that number hides a really interesting anomaly which we’ll discuss in a moment.

The benchmark price for detached properties increased 2.7 per cent from January 2010 to $810,045, while condos increased 1.4 per cent from January 2010 to $390,935.  The benchmark price of an attached unit increased 2.6 per cent between January 2010 and 2011 to $495,140.  Note that year-over-year gains are now approaching savings account levels, but with immeasurably more risk.  But in the city of Vancouver, the sky’s the limit with prices soaring to new highs.

The MLS recorded 1819 sales in the greater Vancouver area in January 2011.  This represents a decline of 5.4% from January 2010.  New listings totaled 4801 for a sales-to-new listings ratio of 38%.  Here’s how the data compares to past years (hat tip to VHB over at Vancouvercondo.info):

Year       Sales    Listings      Sales/New Listings

2002      2248      3626             62.0%
2003      1966      3810             51.6%
2004      1954      3039             64.3%
2005      1697      3360             50.5%
2006      1924      3471              55.4%
2007      1806      4067             44.4%
2008      1819      4675             38.9%
2009      762        3700             20.6%
2010      1923      5147              37.4%                                                                                                 2011      1819       4801             37.9%

Sales came in roughly average for January data spanning the past 10 years.  However, it is worth noting that new listings were decisively above average as they recorded the second highest surge in at least the past 10 years.  One might assume that the new mortgage rules announced in the middle of January would have helped increase both sales and listings towards the end of the month.  I would expect sales to remain fairly average through February and the first half of March before falling off once the new rules come into effect.  However, I fully expect the sales/new listing ratio to trend downwards and sit near decade lows for the remainder of the year as new listings will likely overwhelm demand.

Perhaps the most interesting statistic from this past month is that 21 homes sold for more than $10 million in the Greater Vancouver area in January.  This was reported by realtor Larry Yatkowsky over on his website.  That total represented virtually the entire available inventory of homes in that price range listed on the MLS.  As of this week, only 1 house over $10 million was left for sale in the entire greater Vancouver area.  Bizarre!

(NOTE:  Larry has since indicated that the 21 reported sales was a system error that has been corrected.  Can anyone confirm exactly how many $10 million plus homes sold in GVA in January and provide a source?)

What exactly does that do to the average price?  The typical dollar volume of sales in January in the greater Vancouver area is less than $1 billion.  Though I don’t have the exact dollar volume of sales in January 2011, if it was close to a typical January, and stats suggest it was, it means that roughly 20% of that dollar volume was attributable to just over 1% of the total sales.

Bottom line:  Vancouver sales data registered near their decade averages despite nearly two weeks of frantic buying by those hoping to take advantage of the 35 year ams before they disappear in March.  I expect February to have average to slightly above average sales, VERY high listings, and likely decreasing prices as there should be an above average amount of new buyers entering the market looking for more reasonably priced houses.

Calgary

Total residential sales in Calgary fell 6.7% from January 2010.  Average sales prices rose about 2% year over year, but median home prices declined slightly.

Total inventory stood at 8070 in January, up over 15% from the same month last year.  Once again we see that sales are not keeping pace with the rate of inventory coming on the market.  Sales-to-new listings ratio for single family homes was 40%, while for condos it was 35%, both of which are into buyer market territory.

Average days on the market for all MLS inventory rose to 64 from 53 in 2010.

Bottom line:  Calgary, which has been the worst performer of Canada’s big cities, seems to have turned in a relatively strong showing compares to its peers.  Nevertheless, with the average days on the market increasing inventory piling up, price pressure will follow unless buyers re-emerge.

Edmonton

Edmonton residential sales totaled 735, down 21% from the same month last year.  New inventory was about equal to inventory added in January 2010.  However, due to the lower sales volume, the sales-to-new listing ratio dropped to 34%, on par with the panic-induced market of January 2009.

Average days on the market rose to 67 (once again on par with January 2009) from 53 last January.

The residential average price dropped a whopping 11% from January 2010.

Toronto

Toronto started the year with fairly impressive numbers.  On the plus side, prices were up four percent over January 2010 numbers.  More importantly, the sales-to-new listings ratio registered an impressive 48%.  Though down from last year’s 50% reading, it is nonetheless quite healthy.  While not high enough to spur wide-spread bidding wars, it is high enough to maintain stable prices for the time being.

On the negative side, sales were down from last year by 13% and sit at the lowest point in at least the past 6 years absent the panic-induced meltdown of 2009.  Days on the market surged 30% over last January to register at 36.  The jump is significant, but the overall days on the market is still well within the normal bounds of the past decade.

In general, total inventory and current months of inventory are very low by based on numbers from the past decade.  Inventory in particular is staggeringly low in comparison to past years.  Though in line with last year’s numbers, both 2010 and now 2011 are highly anomalous when compared to the past decade.  Not including January of 2010 and 2011 where inventory was approximately 12000, we find that the average January inventory level is closer to 17000 or some 30% higher.

Where are the sellers?  Toronto’s market has shown some major mood shifts over the past few months, with terrific numbers in November and now January, with a weak month of December sandwiched in the middle.  Of all the major cities, Toronto is showing the most resilience, though it bears watching the inventory and sales numbers over the next six weeks.  With affordability still significantly stretched, the new rule changes stand to squeeze the margins hardest in cities like Vancouver and Toronto where affordability is already near historic lows.

Bottom line:  While many large markets are showing clear warning signs of price pressure in the near term, Toronto is the notable exception.  The absence of sellers in significant numbers relative to past years is somewhat puzzling, though the lack of buyers may have some of them spooked.  Eventually inventory will normalize.  The big question is whether sales volume will normalize with it.

Conclusion

The general trend of weak sales and low inventory persisted through the first month of 2011. Keep an eye on both sales and inventory between now and late March.  While we should see an irrational jump in sales, we should also see a corresponding, if not larger, jump in inventory levels.  Beyond that we know the potential buyer pool will shrink as will available credit for first time buyers.  The new rules will knock 5-8% off the mortgage amount of the average first time buyer.  This alone will squeeze the market.  However, if it is accompanied by falling demand (virtually assured) and rising inventory, the potential is there for some significant price pressure.

Also of note, the 5 year government of Canada bond yield, upon which fixed rate mortgages are set, has been moving nearly vertical over the past few days and has now risen a full percentage point since hitting its low in mid October.  Expect the big 5 banks to raise fixed rate mortgages this week.

Keep in mind that ALL mortgages are now approved based on the 5 year fixed rate.  This applies even to those seeking to use variable rate mortgages.  A 1% rise in mortgage rates translates into a 9% average rise in payments, meaning a comparable reduction in the total mortgage amount being qualified for.  Coupled with the coming mortgage rule changes, new credit and new buyers, the lifeblood of the real estate market, will be entering the system at a significantly reduced clip.

Cheers

Ben

PS- If you live in Montral, pressure your real estate board to get their stats compiled and released earlier so they can be included in this data.  Not sure why they are always the laggard.

If you live in Ottawa, pressure your board to release the raw data (or if someone has a data source, pass it my way).  The press releases from the Ottawa board contain about as much relevant raw data as a bowl of alphabet soup.

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13 Responses to Quick tour through the board stats: January 2011

  1. paulb says:

    FYI, the 21 Vancouver homes over 10m number was incorrect. There was only 1 home sold over 10m. For 21 sales >10m we have to reach back to 2004.

  2. BBC says:

    Interesting. Thanks again for the info!

  3. jesse says:

    So the Vancouver average was significantly higher but only one sale at > $10MM. That tells me the affluent markets are hot (and indeed anecdotally they were in January). I can attest it’s not just rich Asians who are buying expensive properties and they’re not all doing it with their own money. Someone’s “keeping up with the Wangs”.

    Regular poster “VHB” over at vancouvercondo.info noted there has been a disconnect between the 5 year and the posted mortgage rates. Any idea what’s going on there? (See BoC data for details.)

    A few suppositions:
    1) Banks think the recent blip in long rates is temporary and will drop.
    2) Banks are lowering their “posted” rates to be closer to the “discounted” rate.
    3) Banks are attempting to woo borrowers before the March 18th CMHC rule change deadline by making their posted rates more attractive.
    4) It’s unlikely their discounted rates will stop following the 5 year.

  4. Blake says:

    Great post Ben, thanks. I find all your posts extremely interesting and I appreciate your conserative writing style and approach on everything you write. These days it’s hard to get information and especially analysis without a heaping helping of rhetoric. Your writing is great and I’ve become a regular reader as a result.

    Thanks!

  5. mac says:

    Weren’t the mortgage rule changes announced mid-month in January? I think you have to give sales a bit of time (2 weeks) to work their way through the system. But I find this month’s numbers puzzling. Then again, I never bothered with December or January numbers before probably because they are year end/starts.

    12-month HPI for Detached homes up – 22.6% in Richmond, – 12.2% Vancouver West, regional detached home prices up 2.7%

    So what is this saying? YVR & Richmond SFHomes on fire? Everything else doused with water? And what to believe, benchmark shows a general cooling in the wider region and averages reflect what I believe is going on with foreign money and land? I honestly don’t know how else to make sense of this. Why else such a wide discrepancy?

    Then Larry Yatowsky goes on and posts: “List/Sell out-paced the 10-year average for January” which seems to contradict what Ben just posted. Who has calculated incorrectly?

  6. “Then Larry Yatowsky goes on and posts: “List/Sell out-paced the 10-year average for January” which seems to contradict what Ben just posted. Who has calculated incorrectly?”

    I calculated sell to list while, according to you, Larry calculated list/sell. They are the inverse of each other.

  7. mac says:

    Ah. I did not notice that.

  8. brenda woolner says:

    hello ben

    i have been a reader for a couple months now and do not notice much cited about halifax or the maritimes in general. i know that we do not have a big population base in comparison to other canadian cities but we are the capital of NS and the biggest city east of montreal.
    don’t forget about us okay !!
    i appreciate all the hard work that goes into this blog and find it incredibly helpful.
    thanks from this haligonian !!!

  9. Mango says:

    So prices are stable is the point you missed again?

  10. Pingback: Housing starts flatline; Remax discusses past real estate performance; CREA updates 2011 housing forecast; China raises interest rates | Financial Insights

  11. SJM says:

    Echoing what Brenda Woolner said above, what about the prairie provinces of Saskatchewan and Manitoba? Hope you can provide price stats for them.
    Sure hope a buyers market is around the corner for us too.

  12. Pingback: BC real estate marketers getting desperate; Obama vows deficit cuts | Financial Insights

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