More signs of market weakness in Vancouver, Toronto; Spin machine goes into overdrive
OCTOBER 03, 2012
Just a quick note to highlight the latest sales data out of Vancouver and Toronto.
Vancouver:
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.
Toronto:
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.
Cheers,
Ben
Posted in:
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11 Comments
What new paradigm? You sound like another realtor in panic mode sharing your personal stories with the blog. Prices always fall after sales decline. That's called supply and demand, not a new paradigm.
It's over App. The government can't help you anymore. So stop living in fear and go spend your home before it's all gone.
Interesting statistical tidbits from TREB's September report: NO SPIN REQUIRED !
Sales over $1,000,000 September - 343. (Sales over $1,000,000 year to date - 3,759).
Average days on market - 28 (Total Months of inventory - 2.4)
Average price $503,662 (+8.6%) Average sale / list price 98%
Average prices in 416, detached (+10%), semi-detached (+16% ), Townhouse (+5%), Condo (+8%)
P.S. No Spin Required.
Interesting stats "Appraiser". Ben tracks statistical trends over YEARS, not one month...your info is irrelevant unfortunately. Not only that but the only reference to prices he made was "setting the stage for POTENTIALLY significant price pressure". Based on his analysis and yours (and all other RELEVANT economic factors) i'd tend to agree with where Ben is going with this. All markets are cyclical including real estate. If it weren't for interest rates staying low (probably for the next year or 2 ), we would have probably already had a real estate correction but I believe it's coming very soon.
0-$500,000 -30%
$500,000-$1,000,000 -9%
$1,000,000+ +3%
There was 10 more sales in the $1M segment. 343 vs 334 last year. Yippy.
Thanks for the summary, Ben.
I find it interesting how closely Vancouver's sales has mirrored 2008 until now. Probably just noise.
BTW like you Ben I expect Vancouver October 2012 sales to be better than October 2008, but that does not mean sales will be particularly strong. So far the first couple of days averaged 105 or so, which if that were the average for the rest of the month would put sales at about 2300. To equal 2008 would require average daily sales of around 64.
I'd have to sift through past data to see the trend but there may be some quarter-end sales milestones coming down early in October. Looking at your graph, 2300 seems on the high side!
The underlined VREB statement above has been removed in entirety from their press release.
The "interest rates raised to stimulate the economy" comment is an absolute all-time great. I think that will go down as the inflection point of the bust, the moment when realtors would say ANYTHING to get the last few suckers on board.
Great post as usual.
I think it's likelier that the people writing these press releases has no idea what they are talking about. Failed first year macro, if they even attempted it.
This blog has shared the monthly gross sales in Toronto through graph..And even monthly home sales of vancouver..There is drastic difference between both the sales..
so what are you trying to say here?
Great article - thx!!
Do you think it is a good time to try a fsbo and get my equity out in case of a crash????