2010

Archive for 2010

Tuesday, November 2, 2010

October numbers are in…

Greetings all. Seems I’ll not only be spending the next two weeks without internet access (lousy neighbors all password protect their wi-fi), but also cable. So, apparently I’m going to have to fill the hours doing something actually, you know, productive… either that, or watch a lot of DVD’s.

But thanks to a couple trips to the library to do the downloading and uploading I’ll be bringing you the latest resale numbers tonight. Don’t think I’ve been to a library twice in a day ever, which probably tells you how diligent a student I was (hell, class barely saw my shadow, much less the libraries).

Anyway, enough about me, lets talk numbers… and we’re talkin’ down in October. Doesn’t matter whether we’re looking month-over-month or year-over-year, prices are down across the board. The only thing up is the inventory YoY, which tells you all you need to know about why prices are going down.

The median SFH went for $345,000 last month, down five grand from last year and three grand from September… and is now down $55,000 from it’s peak value, or almost 14%. The average is $365,691, which is down about $1400 from last year, but almost $5000 from last month. Not pretty.

And speaking of not pretty, the condo median now sits at $218,000, down $9500 from a year ago and $3000 MoM. They’re also now down $47,000 from the peak value, which is almost 18%. The average condo now goes for $235,894, also down about three thou from a month ago, but only down a couple grand from a year ago.

The preliminary sales tally comes in at 1077, so we can expect the final number somewhere in the 1175 range. Which would still leave it as the worst October tally since 2000. This is down 110 from last months prelim numbers, and 452 from last Octobers revised total.

Like mentioned earlier, inventory is up in a big way from a year ago… but that’s hardly a story, that’s been the case for months. Month-over-Month it actually took a pretty big dive, down 918 from September to stand at 7,689. It’s be interesting to see how many delistings come next month, cause there has been a bit of ebb and flow to this figure over the summer, but come December it’s gonna be a tidal wave.

Finally, and as always, here are the hard numbers:

Sales* = 1,077
Since two years ago = -9.9% (-118)
Since one year ago = -29.6% (-452)
Since last month = -9.3% (-110)

Active Listings = 7,689
Since two years ago = -9.8% (-836)
Since one year ago = +39.0% (+2,159)
Since last month = -10.7% (-918)

Single Family Homes Median* = $345,000
Since peak (May ’07) = -13.8% (-$55,000)
Since one year ago = -1.4% (-$5,000)
Since six months ago = -6.8% (-$25,000)
Since last month = -0.9% (-$3,000)

Condo Median* = $218,000
Since peak (July ’07) = -17.7% (-$47,000)
Since one year ago = -4.2% (-$9,500)
Since six months ago = -8.0% (-$19,000)
Since last month = -1.4% (-$3,000)

Residential Average* = $317,422
Since peak (July ’07) = -10.9% (-$38,717)
Since one year ago = -0.9% (-$2,762)
Since six months ago = -6.5% (-$21,892)
Since last month = -2.8% (-$9,077)

Single Family Homes Average* = $365,691
Since peak (May ’07) = -13.8% (-$58,709)
Since one year ago = -0.8% (-$1,434)
Since six months ago = -4.6% (-$19,668)
Since last month = -1.3% (-$4,963)

Condo Average* = $235,894
Since peak (July ’07) = -14.0% (-$38,485)
Since one year ago = -0.9% (-$2,160)
Since six months ago = -7.1% (-$17,894)
Since last month = -1.2% (-$2,928)

* Preliminary data, subject to revision

3 comments

Thursday, October 28, 2010

Kiss and make up

Filed Under: Canada

Perhaps an odd choice of video to open today’s post, but in a weird way, it’s kind of fitting. Those of you unfamiliar with the show “Oz” would gather from that clip a first impression of the show radically different than what the show really was, and are probably wondering why Juno’s dad is singing and dry humping a dude (FWIW, that’s got nothing on what he did to him in the very first episode)… those with only a passing interest or knowledge of it, probably now think it is far more bizarre and perverse than you ever imagined… and those of us who watched the entire series are hopefully laughing your asses off.

Anyway, on to actual news. So the big story this week was the CREA and Competition Bureau deciding to play nice and avoid going to tribunal. We’ve been following this story for almost a year, as it had it’s ups and downs. So, those of you hoping for a Brock Lesnar vs. Cain Velasquez like showdown, ya ain’t gonna get it.

For those curious, I’ve uploaded the actual agreement. Seems that for the most part this entire pissing contest has been over the wording of a few mere sentences. Who knew when semantics crossed with bureaucracy could waste so much money?!?!

Both sides have of course spent the last few days telling the world how they won, or at least didn’t lose. Can’t really give either side the knockout, but I guess I’d have to give it to the Competition Bureau a slim decision on points. Though, time will tell I guess.

Long story short, basically now the MLS will be open those who wish to offer a la carte realtor services. Some argue it always has been, but while that may be true to a point in theory, in practice some regional boards have not. So this order basically declares the CREA and all it’s regional boards must allow such services, and if a boards fails to it can be sanctioned and even suspended from participating in the MLS.

I don’t really think the decision hurts the CREA much, as they had more-or-less been offering this concession already. More than anything, they probably just don’t like all the press this has gotten, and widespread airing that fees and services are largely negotiable. Historically the modus operandi tended to rely on pretty much just herding everyone into the same compensation structure and hoping they don’t dig or ask questions.

Personally, if I was buying I’d look to strike a buyers agency agreement with an agent that would see you pay them by the hour, and that any commissioned offered to the buyers agent by the seller would go straight to me. This removes most of the moral hazard that if rife in the current arrangement.

Of course, most buyers probably wouldn’t go that route, since they think they’re getting the service for free… but most of them probably couldn’t spell amortization, much less explain what it is. Unfortunately our naive and lazy consumer nature is exposed… that’s what they rely on.

So, if you ever decide you’re going to buy, be smart about it. Expect to do some work, know you stuff, and treat it like you’re playing with hundreds of thousands of dollars, cause you are. Many seem to forget that since they’re usually borrowing the vast majority of the funds, but that is your money, and the bank won’t let you forget that… not two months, two years, or two decades from now.

Before I go, just a quick note… I’m doing the final move this weekend, and despite setting it up a month ago, I’m not going to have internet at home until mid-November. So, unless I have an unwitting neighbor with an unsecured wireless network, the site might get a little quiet. Hopefully between the library and flash drives I’ll still be able to throw a few posts up in that time. If you’re looking for something to do, go check out “The Girl Who Kicked the Hornets’ Nest“… though for the uninitiated you’d want to check out the two prequels on DVD first.

1 comment

Wednesday, October 20, 2010

September sales report

Filed Under: Sales

The revised sales numbers for September have been released. I guess I shouldn’t call these the “final” numbers, since these numbers seemingly never cease being revised. I have no idea what they’re doing with their numbers, and it’s becoming increasingly apparent that they don’t either. Anyway, enough kvetching, lets get to the stats.

The revised tally came in at 1,282 for September, down slightly from August, but almost 25% from September last year. As we can see from the graph we’re a little low historically, but still well above the contemporary low water mark set back in ’07, when the market was first turning after the big boom.

Looking at the seasonality, we’ve eked back within one standard deviation of the mean predicted by our year-to-date sales. Given our current trajectory, it looks increasingly likely we’ll be coming in around 16,000 for the year (give-or-take a hundred)… which could make it the lowest annual total in a decade, and lowest since 2000.

Looking at his historical year-to-date figures, here is a look at those. We’re well below anything we’ve seen since ’04… and we’ve been losing steadily to the the ’01-thru-’03 years over the summer, and when all is said and done for the year it looks like we’ll likely come in below them. We’re in no danger of coming in below ’00 though.

It’s interesting looking at the ’07 figures. We can see that through June that year the sales tallies were HUGE… but then the market turned fast, and sales just hit a wall. It’s an interesting dichotomy, the first six months were obliterating records for those months to the high side… then the second half of the year it’s setting contemporary lows every month by equally large margins. Consumer sentiment is a fickle beast!

Finally, lets touch on absorption rate. We’re obviously extremely high historically, but still dwarfed by the ’07 figure… which was obviously the result of extremely low sales as we noted, and inventory levels just shy of 10,000. Interesting note, that September ’07 rate of 9.52 is actually the second highest in modern history, behind only the 10.39 of December ’08.

Our current level is 6.71. Obviously well above where it was a year ago, but actually down a tad from last month when it was 6.87. This is due to inventory dropping a bit, while sales were only down a tad month-over-month. We’ll probably see the rate climb over the fall, as this is typically when sales really start seeing the seasonal forces.

2 comments

Friday, October 15, 2010

Movin’ on up!

Filed Under: Foreclosures

Sorry about the lack of updates, I’ve been more than a little busy. I’m in the midst of changing careers as well as relocating (moving about an hour outside the city). Was originally hoping I wouldn’t have to start until the New Year, but they didn’t want to wait that long, so rather than a few months, I have one month (of which only a couple weeks are left now).

So, yeah, my life has been a little bit crazy… add to that a girlfriend that is beyond pissed off and seemingly doing everything in her power to make my life even more difficult, and needless to say my spare time has become nearly none existent. Not entirely sure whether she is more pissed about my moving out of the city, or that I’ll be making a lot less money for a couple years until I finish articling. I imagine it’s probably the money, I doubt she’ll miss me!

As far as the blogging goes, hopefully I’ll have more time to dedicate to it once I get settled. I imagine the first six months will be pretty stressful, but as I don’t know anyone there I may end up with an awful lot of free time too. I guess we’ll find out.

Anyway, enough about my sad little life though, on to the stats! The July mortgage arrears numbers were released today, and to continue our theme… those too are “movin’ on up!”

After topping out in December with a new high we’ve been kind of range bound. After the meteoric rise over the prior couple years, we witnessed a sudden reversal over the winter, but then we started creeping up again in the spring, and as of July we had broken through to set another new record high, hitting 0.76%. Up from 0.73% in June, and 0.62% a year ago.

I imagine this is a probably the result of the softening of prices since April, but who really knows, at this point I still thinks it’s too early to officially declare we’re out of our range bound stage. If we continue to see significant declines in prices over the fall and winter though, I would not be surprised to see the rate climb beyond even our current levels, perhaps even significantly.

Nationally the rate continues to hold at 0.42%, unchanged MoM and YoY. The Atlantic provinces continue to run a distant second for highest regional rate, coming in at 0.45% (up 0.01% MoM, down 0.03% YoY), but BC is closing in on them at 0.43% (up 0.01% MoM, up 0.08% YoY).

The next tier consists of Ontario at 0.37% (unchanged MoM, down 0.06% YoY) and Quebec at 0.35% (unchanged MoM and YoY). The our prairie compatriots make out the bottom end, with Saskatchewan rating 0.29% (up 0.02% MoM, up 0.06% YoY), and finally Manitoba is low man at 0.26% (unchanged MoM, up 0.01% YoY).

4 comments

Tuesday, October 5, 2010

September numbers are in…

Filed Under: Monthly Stats

Yesterday the resale numbers for September were released, and today we’ll take a look at them. Sorry I didn’t get to this yesterday, but I had today off and figured I’d rather knock it out when I had some time. Then I decided it was a good time to do some spring cleaning… I prefer to think of it as six months early, rather than six months late… and as things tend to go when I try to clean, I start by making an even bigger mess, but that’s alright, since I figure I’m achieving better economies of scale.

What was I talking about again? Oh yeah, resale numbers, lets talk about those!

On the price front, condo’s were trending up over August, both in median (+$3,000) and average (+$6,592), but remain down from a year ago (-$4,000 and -$5,452 respectively). Single-family-homes were kind of the opposite, they were down from August, median dropping -$2,000 and average -$1,599. Year-over-year the median is pretty much the same (down -$100), but average is still up (+$3,009).

So, on the whole we’re continuing to see the YoY numbers drop closer and closer to par, if not already below. We can expect to continue seeing this through the spring until March, when last years price swoon will show up and make the YoY comparison look really ugly. We can already see it in the 6-month comparisons we include below, where in all categories we’re well into the 5-figures for declines.

Sales were pretty much equal to Augusts tally, with the preliminary numbers coming in just down -8 (1,187 from 1,195), and if last months adjustment is any indication that should put the final tally at about 1,300. This remains down significantly from last year (1,674), and quite low historically.

Inventory is continuing it’s seasonal erosion, down -215 from August to sit at 8,607. Obviously this is still up in a big way from a year ago (+2,575), and extremely high historically. Seems the big drop in July was an outlier as the declines since then have been more moderate, but we can perhaps expect the drops to accelerate a big heading late into the fall, and obviously then we’ll have the big spike of delistings in December, only to come back on line soon thereafter.

Finally, and as always, here are the hard numbers:

Sales* = 1,187
Since two years ago = -27.3% (-446)
Since one year ago = -29.1% (-487)
Since last month = -0.7% (-8)

Active Listings = 8,607
Since two years ago = -2.3% (-201)
Since one year ago = +42.7% (+2,575)
Since last month = -2.4% (-215)

Single Family Homes Median* = $348,000
Since peak (May ’07) = -13.0% (-$52,000)
Since one year ago = -0.0% (-$100)
Since six months ago = -4.4% (-$16,000)
Since last month = -0.6% (-$2,000)

Condo Median* = $221,000
Since peak (July ’07) = -16.6% (-$44,000)
Since one year ago = -1.8% (-$4,000)
Since six months ago = -5.6% (-$13,000)
Since last month = +1.4% (+$3,000)

Residential Average* = $326,499
Since peak (July ’07) = -8.3% (-$29,640)
Since one year ago = +0.9% (+$2,821)
Since six months ago = -5.0% (-$17,108)
Since last month = +0.3% (+$911)

Single Family Homes Average* = $370,654
Since peak (May ’07) = -12.7% (-$53,746)
Since one year ago = +0.8% (+$3,009)
Since six months ago = -4.6% (-$17,819)
Since last month = -0.4% (-$1,599)

Condo Average* = $238,822
Since peak (July ’07) = -13.0% (-$35,557)
Since one year ago = -2.2% (-$5,452)
Since six months ago = -5.4% (-$13,594)
Since last month = +2.8% (-$6,592)

* Preliminary data, subject to revision

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Friday, October 1, 2010

The Elusive Canadian Housing Bubble – Fall 2010 Musings

Filed Under: Macroeconomics

Here is the latest follow up to Alec Pestov’s paper The Elusive Canadian Housing Bubble. This time around he’s comparing the current conditions, with those that presented themselves during the late 80′s when much of the country experienced a bubble (much like this time, Alberta was a little ahead of the curve, and had ours about a decade earlier). So check it out, and if you have questions or thoughts, fire away in the comments section as Alec sometimes drops by and may even address your queries directly. Have a good weekend guys and gals!

The Elusive Canadian Housing Bubble – Fall 2010 Musings

4 comments

Monday, September 27, 2010

New Construction Inventory

Filed Under: New Constrution

Over the last week or so we’ve been hearing about a glut of completed but unabsorbed units forming on the new construction front. It’s also been awhile since I touched on such things, so figured now is as good a time as any for an update.

Most of the hysteria is Toronto-centric… and rightly so, as their new construction inventory has almost doubled from a year ago, and that build up is almost the exclusive domain of apartment/row units, which inventories have more than tripled in the last year. We’ve also seen similar, but not as steep climbs in Vancouver and Calgary.

So what about Edmonton? Well I’m glad you asked, even if you didn’t. Edmonton actually hasn’t had much change year-over-year, though that isn’t exactly cause for celebration, cause it was really bad last year. We just haven’t gotten worse. To put it another way, even with Calgary’s year-over-year worsening, we still have over 25% more inventory in the system.

Taking a look at the graph we can see how we got here. While our overall total hasn’t changed a lot going back two years, the composition of it has changed drastically. Before last years mini-boom we had a large glut of freehold units (mostly single-family-homes) remaining unsold… those got cleaned out with the high sales the city experienced.

But… condo’s didn’t sell quite as well, and with their longer construction cycle, continued to hit the market fast than they could be sold, and largely offset the freehold drop.

Unfortunately I don’t have data going back beyond 2006, so it’s hard to say exactly what “normal” levels are, but we do appear to be in the ballpark for what we were experiencing in early ’06, just before things started to get ridiculous… so our current levels may not be so bad, at least as far as the developers are concerned.

That is of course to bear in mind that these figures only pertain to brand new construction, and has nothing to do with the resale market. The market as a whole does not appear nearly as healthy, but it seems that for the most part the ones holding the bag now are the first-time-buyer/speculator.

That shouldn’t come as a big surprise though, as I suggested last year when sales started to take off that it was essentially a “Get out of jail free” card for builders, cause it allowed them to clear out a whole lot of established and under construction inventory that they otherwise would have had to hold… and until that was cleared out, we were unlikely to see any more building sprees. As the binge only lasted about a year, it was very much a boon to the developers and allowed them to regulate their inventory levels.

1 comment

Tuesday, September 21, 2010

200

Filed Under: Macroeconomics

So, apparently this is my 200th post… okay, actually it’s 201. I was going to write this last week but inspiration never struck, and the sales data came out, so it didn’t happen… but who’s counting anyway?! Its interesting looking back, it’s been almost two years since this blog started and in a lot of ways the market is almost right back to where it was when we began.

Alright, so at the time I was figuring by now we’d be down 20% by now, and obviously we’re not there (yet?!). I’ll be the first to admit my understanding of the market and all its factors has grown by quantum leaps since then… but I actually still think it was a good guesstimate given the information available at the time. Reminds me of the old economist’s adage, if you give a number, don’t give a date… if you give a date, don’t give a number.

If I had known we were just months away from governments the world over collapsing interest rates, I probably would have had a different take. But in a roundabout way it has kind of proven my suspicion of weak market fundamentals to be true. Interest rates are still at all-time lows, yet after the novelty wore off, the housing market just as quickly ceded its gains, inventory surged again, and sales have plummeted.

So, like I said, we’re kind of back where we started. Except now interest rates have absolutely nowhere to go but up. That’s not to say there are not other measures the government could (and might) take to attempt to prop up the market should they so choose… but given the current climate and resistance to further deficits that kind of ties their hands. Beyond that, they need look no further than South of the border to see that when the housing market get overvalued you can throw the kitchen sink at it policy wise and it will do nothing for the market long-term. Regression to the mean is a powerful force.

Truth is I suspect we’re on the cusp of a new paradigm. The age of the house, some GIC’s and a mutual fund isn’t going to cut it anymore. This last 30 years has kind of been the golden age of real estate. Prices have been rising faster than inflation… but I think we may have reached out limit and the clock is ticking.

The conditions that gave us 30 years of gains are about the reverse. Interest rates have been going down virtually the entire time, but they have now hit their absolute bottom. That’s not to say I expect them to start going up soon, but they will eventually. Nothing like what we saw in the early 80′s, but back to 6-7% is a given… and if people aren’t willing to pony up rates are 2-3% below that, it doesn’t paint a pretty picture.

Beyond that, demographics are about to shift radically. The last 30 years have seen the Boomers come of age en masse, all the while fuelling massive economic growth, earning a ton of money and spending it almost as fast. That’s about to change… in the next 30 years this colossal age bracket is going to go from an unprecedented tax contributor, to an unprecedented drain. No more buying bigger and better, they’ll be selling out. Not good news when supply is already outstripping demand.

Buying a house and passive investing isn’t going to cut it the next 30 years when it comes to building wealth. In a few years we may begin to question if it even worked the last 30. Going forward, wealth will only be built through living within ones means, active investing, and eschewing debt if one can’t use it wisely. Fiscal excess will no longer be en vogue… instead fiscal restraint will.

We’re in the dying days of the era of credit, and on the cusp of the era of cash.

15 comments

Friday, September 17, 2010

August sales report

Filed Under: Sales

We’ve got a look at the final sales numbers for August, and after adjustment they came in at 1,305 for the month. So, it managed to sneak past August ’07 to avoid the distinction of being the lowest total in a decade, but still came in a comfortable second.

And here is a chart reaffirming that. Not much else to add… ’05 and ’06 sure stick out though, and even ’09 to a smaller degree. Typically we seem to come in around the 1400-1500 range in August, so we’re maybe 10% below “normal”. Year-over-year we’re down 22%, and month-over-month down 6%.

Figured I’d include a new chart this month, this being year-to-date sales. Just a little something else to munch on. It’s interesting to note the contrast between the sales pattern last year and this year. Last year we had the worst first quarter in a decade, but had huge second and third quarters to, where as this year it’s been much the opposite. Just goes to show that interest rate manipulation can certainly have short term effects, but the novelty will eventually wear off.

Now we’ll look at the seasonality trend. Our year-to-date sales of 11,955 put us on pace for about 16,776 on the year… but that is very unlikely as we’re trakcing more than one standard deviation below what would be required to do that. We do seem to have finally leveled off a bit and have tracked consistently in July in August, and at this pace it’s looking like we should come in somewhere around 16,000 for the year when all is said and done.

And finally, knowing the final sales tally, we can now figure out the absorption rate… and it comes in at 6.8. A tad lower than the record for August set in ’07, when inventory was first spiking, and coincidently the last time sales totals were this low. We’re up from 6.4 in July, and from 3.9 a year ago. So much for those who thought the inventory evaporation last year was for real huh?!

In conclusion… have a great weekend everyone!

4 comments

Monday, September 13, 2010

Household debt levels finally stabilizing?

Filed Under: Macroeconomics

The 2nd quarter National Balance Sheet Accounts numbers were released today, and it appears households may finally be starting to rein in their debt levels just a little bit, at least relative to disposable income. We’ve been following the debt-to-disposable-income ratio for awhile now, and in the second quarter we saw a rather dramatic reversal as it dropped 3%, from an all-time high of 148.58%, to 145.57%.

One month obviously doesn’t make a trend (and we can see it often just resumes rising after a down month), but this is the first major downward movement in this measure in years. Beyond that we’ve been wondering why despite the recession we hadn’t seen a hint of levels slowing down as they typically do in such economic circumstances (as as was seen in the numbers in 2000).

Fortunately, or unfortunately, depending on how you want to view it, this drop is not rooted in an actual decrease in debt levels, but rather an increase in disposable income. The Household-debt-per-capita measure jumped by another $800, and now sits at $43,400, and is up over $3,000 from 1Q 2009 when the recession really took hold.

Knowing that, it’s not a surprise the the debt-to-GDP ratio continued to climb… up almost half a point in the quarter to rest at an all-time high of 94.17. Though at least this ratio has more-or-less leveled out in the last year.

So, long story short, we had some good income gains in the second quarter of this year, unfortunately we continue to pile on the debt.

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