2011 January

Archive for January, 2011

Tuesday, January 25, 2011

December Sales Report

Filed Under: Sales

We’ve finally got a look at the revised December sales numbers, and with that was can finally put a fork in 2010 and take a look at the stats.

The updated number for December came in at 848, up from the initial announcement of 784. About an 8% adjustment comes in right around what it usually does. We can see from the seasonality curve that put us right about where we should be given the total sales on the year. A little late year volatility after trending one standard deviation below the predicted curve for most of the 2nd half until an pretty big aberration in November.

Here is how this December stacked up against December’s past. We came in at the low end, just nosing out 2002 to come in with the 4th lowest tally since Y2K, but fairly close to the normal range for the month. Nothing like 2006 or 2008, which are pretty clear outliers (for it’s time, 2000 was actually the highest on record up to that point).

Absorption rate remains extremely high… though not 2007/2008 high. I lot higher than a year ago, but that’s no surprise. That ’08 December mark of 10.4 is actually the highest on record for Edmonton, and the Dec ’07 mark is the 4th highest, just for some perspective.

Finally a quick look at the annual sales. Spin it however you like, but 2010 had the lowest sales total since 2003… and this was even after an uber-hot late-winter/early-spring. Without that we very likely would have came in with the lowest total since 2000.

It’ll be interesting to follow into 2011. Obviously the lay of the land right now is pretty dismal, but with the recently announced changes in lending rules we could very well see another wave of dumb money this winter. Not sure how much of that can still be laying around out there, but I’ve been surprised before, and as Einstein said, “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”

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Tuesday, January 18, 2011

Back to the Future

Filed Under: Canada, Mortgages

Better late than never, our beloved federal Finance Minister, Dim Jim Flaherty, dropped a big ole lump of coal in the stockings of the CREA and CAAMP yesterday. Clawing back mortgage requirements again, much like they did a year ago. Harper and Co. seem to be trying to play this off like they’re saving the country from the bony grip of debt… blissfully omitting the fact they were the ones who spiked the punch bowl in the first place.

Basically the changes we’ll see come March 18th boil down to this:

1) Max amortization periods will be lowered from 35 years, to 30 years
2) HELOC’s are now limited to 85% of the homes value, down from 90%
3) CMHC will no longer back HELOC’s

What’s it all mean? Well, lets look at it point by point. First, the change to amortization length from 35 to 30 years. Basically what this does is lower the amount a borrower can qualify for. So lets say you qualify for $300,000 under the current rules, come March 18, you’ll only qualify for $280,000. Here is a visual aid that may help.

Obviously this graphic hasn’t been updated to reflect the new changes, but this effectively puts us back at the level we were at in March 2006. Back to the first step up our stairway to disaster as it were. In fact if the feds had reigned in their changes at that point we could have limited our bubble in Alberta to a much more modest level, and in all likelihood saved most the rest of the country from any at all. But alas, they really took the axe out in June 2006, and after that all bets were off.

Basically this is going to make the already shallow pool of first time buyers out there evaporate even more, and those that do stay in will have less to play with. Thus I imagine we’ll continue to see further tightening at the lower end of the market, and as those transactions are typically the oil that keeps the market running smoothly, we’ll eventually see it work it’s way up into the higher end as the gears start grinding.

Changes 2 & 3 deal with HELOC’s, and these aren’t really going to have a direct effect on housing… but they’ll have a serious effect on household spending. No only will people not be allowed to borrow as much, but with the CMHC no longer backing those instruments, the cost of financing is going to go up. And by that I mean above and beyond just the expected increases in interest rates.

When the CMHC still backed HELOC’s they basically game the system to more-or-less allow everyone to borrow money at similar terms. Unless one had VERY poor credit, the sums involved and your credit worthiness was largely a none factor and it allows everyone to enjoy the lowest of borrowing rates, thus borrow more money. Now with the government out of the game, it means lenders will have to obtain insurance for those loans privately, and now the more your borrow, and/or worse your credit history, the higher that interest rate you’ll have to pay, and the more you’ll have to pay indirectly for insurance.

I imagine that will have a pretty chilling effect on consumer spending. Particularly the under-40 crowd, which it seems all to ofter lives off consumer debt, and lives a little too well. I guess the good news out of this is that if you’re affected by the first change, at least you’re not affected by the other two… cause, lets fact it, you have no equity to borrow against!

At the end of the day I guess we should look at these changes as another step in the right direction. If we wanted to look a gift horse in the mouth we could say we’d still like to see amortizations ratcheted all the way back to 25 years, and down payments requirements raised to 10% (and that would REALLY throw the brakes on first-time-buyers)… but alas we’ll just have to wait on that. It’ll give me something to bitch about anyway.

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Wednesday, January 5, 2011

December numbers are in…

Filed Under: Monthly Stats

Hope everyone has found their ways back after a holiday break. Always nice to go home for the holidays, reminds you why you don’t go back more often. Don’t get me wrong, I love my family to death… but the likelihood of a death increases exponentially with each day I’m exposed to them. All jokes aside, hope everyone had a great festive season!

Getting back on point though, the December numbers are in, and it seems temperatures weren’t the only thing down in December.

Prices took a beating last month. Single family home prices sunk to levels we haven’t seen since the lowly days of the winter of ’08, back in the worst of the financial crisis and before interest rates were tanked. The SFH median dropped to $336,500 and the average to $355,271. As we can see from the graphs the lowest in two years, and not far above the bottom of the first phase of the bust. If/when it goes much lower, we’ll have to go all the way back to ’06 for a comparison.

Month-over-month the median dropped $13,500, oddly close to the year-over-year drop of $14,000 (which is about 4%, a little scary considering the ultra strong winter which goosed prices). But December can be a bit of an outlier with the typically reduced activity, though I do expect this weakness to continue right through the winter and spring just don’t be surprised if there is a little bounce in January.

Condo’s actually didn’t fair terribly on the whole, infact the median was up $2,000 MoM. Average was down over $6,000. Year-over-year they aren’t doing as well though, the median now sits at $220,000, down 3.5% ($8,000) from a year ago. The average took an monster hit or 7.2% ($17,342) from a year ago and now sits at $223,454. The softness of the condo market continues to make itself known. The average actually now sits at it’s lowest point since November 2006. Yeah, 2006. Not purdy.

After an oddly strong November, sales tumbled back to about the level they were expected to for December given the yearly trend, with the preliminary number coming in at 764. Rather low for December, but well above the brutal number put up in December 2008 when the preliminary number was a mere 543 (that was the worst December tally since 1994).

It does put us over 16,000 for the year though, we won’t know the final number until the revised number is revised figure comes out later in the month. Hell, we won’t even know then, they never seem to stop playing with these figures since they changed methods a year ago. In anycase, this will be the worst year sales wise since at least 2003, or even 2002 depending on what the revised number is.

Now time for the EKG, see all that bad cholesterol we shoveled down during the break is effecting us. As expected, we eclipsed the -1000 MoM mark last month, pretty much business as usual for December. A little bit bigger drop than last year, but not as big as the two years preceding that. What’s it mean? Who the hell knows, there is still a shitload of homes on the market. That’s what it means!

There are 5,721 to be exact, about 1700 more than a year ago at this time. I imagine they’ll come back online as per usual over the winter and spring. The heights it will reach will depend on the desperation, I’d think 8-9,000 come summer is a sure thing… if we eclipse 10,000 we’ll know things are getting real ugly out there.

But fear, cause even if you think this news is a big lump of coal in the stocking of housing bulls… it could always be worse. For example, just before the break my boss dropped a file on my desk and said get it down ASAP this guy could bring us a lot of business and he want’s to tell him what’s what before the break. So I worked on the file, and just before leaving for home I swung by his office to drop it off. He asked my what the good news was… I looked at the file, shrugged, and said, “Well, he hasn’t been audited yet.”

The partner grabs it, and says it can’t be that bad. I then proceed to tell him the guy has been funneling off money for years from his company and not reporting it… thus has an outstanding tax liability of well over a hundred thousand dollars. So no matter how bad your holiday was, it was quite probably better than our clients, cause you might have some fat credit card bills coming in the mail, but at least they aren’t to the tune of six figures!

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

Sales* = 784
Since two years ago = +44.4% (+241)
Since one year ago = -11.0% (-97)
Since last month = -30.0% (-336)

Active Listings = 5,721
Since two years ago = -9.4% (-595)
Since one year ago = +41.7% (+1,684)
Since last month = -18.1% (-1,261)

Single Family Homes Median* = $336,500
Since peak (May ’07) = -15.9% (-$63,500)
Since one year ago = -4.0% (-$14,000)
Since six months ago = -6.3% (-$22,500)
Since last month = -3.9% (-$13,500)

Condo Median* = $220,000
Since peak (July ’07) = -17.0% (-$45,000)
Since one year ago = -3.5% (-$8,000)
Since six months ago = -4.3% (-$10,000)
Since last month = +0.9% (+$2000)

Residential Median* = $300,000
Since peak (July ’07) = -12.7% (-$43,500)
Since one year ago = -1.6% (-$5,000)
Since six months ago = -4.8% (-$15,000)
Since last month = -2.6% (-$8,000)

Single Family Homes Average* = $355,271
Since peak (May ’07) = -16.3% (-$69,129)
Since one year ago = -2.7% (-$9,970)
Since six months ago = -9.3% (-$36,226)
Since last month = -2.0% (-$7,386)

Condo Average* = $223,454
Since peak (July ’07) = -18.6% (-$50,925)
Since one year ago = -7.2% (-$17,342)
Since six months ago = -7.9% (-$19,190)
Since last month = -2.7% (-$6,149)

Residential Average* = $308,497
Since peak (July ’07) = -13.4% (-$47,642)
Since one year ago = -2.0% (-$6,348)
Since six months ago = -8.0% (-$26,900)
Since last month = -3.4% (-$10,982)

* Preliminary data, subject to revision

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