All posts by wreckonomics

House Price Index – start the count over

Real estate can be tricky to track stats for. There’s so much variation between different properties. Average sales prices get pushed back and forth based on the sales mix.

There are two sources for a more consistent tracking of house prices. One is the Teranet House Price Index, which tracks only properties that have at least 2 sales. This ‘sales pair’ approach tracks the effect of specific properties changing price each time they’re sold. There are two drawbacks to this index: It doesn’t track improvements to a property and it’s delayed by about 3 months.

The other approach is the REBGVs MLSlink HPI based on a hypothetical property that is averaged to specific traits: number of rooms, finished basement etc. The MLSlink HPI has been a consistent gauge of the local market since the mid 90s.

That’s changing now. Vancouver was the only market with a House Price Index, but the old index has been thrown aside for a new one from the CREA that is consistent between Vancouver, Fraser Valley Calgary, Toronto and Montreal.

For data-hounds, this means that you’ll not be able to directly link trends in the new index to earlier data. January 2012 becomes the zero month of this new system. Ladies and gentlenerds, start your graphs!

Carney cries wolf again.. will it come?

Mark Carney is making new remarks about some Canadian real estate markets being “probably overvalued“.

It was the second time in recent days that Bank of Canada Governor Mark Carney voiced concern about property prices, which surged after the financial crisis as borrowing costs tumbled.
“We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there. We’re watching it closely. We’re working with our partners, the federal government, the superintendent of financial institutions,” he said in an interview on “Question Period” on CTV.

“Measures have been taken. They’ve been effective. We’ll keep up that vigilance. If more needs to be done, I’m sure the appropriate authorities will take those measures.”
The federal government has tightened mortgage regulations several times in a bid to prevent a property bubble from forming. Finance Minister Jim Flaherty said on January 17 that the government is watching the housing market closely and is ready to intervene if needed, but is not about to do so now.

Yes, the federal government has tightened mortgage regulations “several times”.. Here’s a timeline of those changes courtesy of Burbs Boy:

Jan 2006 – Minority Conservative Government elected
Feb 2006 – 25 year increase to 30 year on test basis
Jul 2006 – 30 year test affirmed and also increased to 35 year
Jul 2007 – 35 year increase to 40 year
Oct 2008 – 40 year decrease to 35 year
Mar 2010 – 35 year decrease to current 30 year

428 new listings, 65 sold in one day

According to Paulb Monday was our first day of over 400 new listings in 2012:

New Listings 428
Price Changes 64
Sold Listings 65

Know how many days in 2011 had more than 400 new listings? None.

And look what’s happening in Richmond courtesy of Inventory.

Richmond Jan 3-16
New Listings 534
Price Changes 77
Sold 86

Some interesting things happening in this market early on in the year. The worst january in the last 10 years was in 2009 which saw a 20% sales to list ratio (we usually see at least double that).

Going down?

At least one person thinks that Global Recession MkII is about to cause Mr. Carney to slash interest rates in Canada. The prediction is a 75% drop from the rock bottom 1% to a rocker bottomer .25%

This could be really good news for the few people who’ve built up good credit and cash. I can think of at least two cases where debt levels rose so high that property prices were crashing while interest rates were dropping.

There are many places in that big country just to the south of us where you can buy a house for half what it cost a few years ago and you can lock in for ridiculously low mortgage rates. Japan also saw home prices dropping while interest rates fell. Heck it even happened here in Vancouver at the start of the eighties.

Only a moron would think that a housing market crash means no one is buying and everyone loses their job. Someones always buying, they just don’t always pay the same price.