OCTOBER 03, 2012
Just a quick note to highlight the latest sales data out of Vancouver and Toronto.
September sales in Vancouver plunged 32% year/year and 42% below decade average:
In a sign of either complete desperation or total incompetence, the Real Estate Board of Greater Vancouver noted the following:
“There’s been a clear reduction in buyer demand in the three months since the federal government eliminated the availability of a 30-year amortization on government-insured mortgages,” Eugen Klein, REBGV president said. “This makes homes less affordable for the people of the region.”
Trying to pin the sales slump on the recent rule changes is ridiculous. As you can see above, sales have been at decade lows since April. The new rules took effect in July. The Board needs to look a little harder for a scapegoat. That Vancouver was approaching a reckoning has been obvious to anyone willing to look at the fundamentals, or lack thereof, that support this market.
Meanwhile listings continue to be elevated. This imbalance between supply and demand is a guarantee of continued price pressure in the near term.
High existing inventory and weak sales will only be compounded by rising new unit completions set to begin in early 2013. Builders could not possibly have timed this any worse.
For a lengthy explanation of why sales have fallen as rapidly as they have, see this post.
While we're picking on ridiculous RE board comments, readers may get a kick out of a gem from the Victoria real estate board press release:
The average price for single family homes sold in Greater Victoria last month was $589,361, down from September 2011's average of $622,393. The median price is down by $16,500 to $517,500 over September 2011.
"We are at a bit of a standoff in the Greater Victoria real estate market," says Carol Crabb, President of the Victoria Real Estate Board.
"Buyers are waiting for prices to go down, but there are no economic indicators to show that will happen.
[...] "The median price of a single family home is only 1.5% lower than last year and that number has held steady for the last five months," Crabb says. "Interest rates are also holding, but should they increase by as little as 1%, that would negate a 10% drop in purchase price. People shouldn't wait for prices to drop, because we never know when interest rates will be increased to stimulate the economy."
Yes indeed, raising interest rates is always the monetary tool of choice to stimulate the economy. And house prices are in no way constrained by the capacity of buyers afford them.
ADDED: I see the comment above has now been removed from the board press release. A wise move.
Sales in Toronto fell 21% in the GTA and 25% in the city on a year/year basis in September, though prices were up strongly. Sales fell to the lowest level for any September in the past 10 years while MLS inventory was up sharply:
Condo sales fell 27% in the metro region and 29% in the city. The downtown condo market again weakened, with sales only marginally above 2008 levels while total listings surged higher:
Of course, falling condo sales are problematic when 46,000 condo apartment units (out of 64,000 total dwellings) are currently under construction, setting the stage for some potentially significant price pressure, as I noted recently.