Friday, March 23, 2007

Friday Low-End Market Watch

Back again with the now-weekly review of market activity in the segment we're paying close attention to. Last week's numbers are in brackets.

[criteria is suited, or suite potential, under $425K in SW, SE, Vic, Langford, ESQ]
Total houses: 76 (71); 5 new listings, same as last week

Number sold: 46 (35); 11 above previous week

Sold above asking price: 1 (1); again, I counted sold at asking as above

Sold below asking price: 10 (11)

Average days on the market: 38 (37)

Listings to sales ratio: 76/46 = 1.65 months inventory (71/35 = 2.02); big decline in inventory

[criteria is 2 beds, at least 1 bath, under $250K in SW, SE, Vic, Langford, ESQ]
Total condos: 122 (109); 13 new listings, same as last week

Number sold: 48 (38); 10 above previous week

Sold above asking price: 0 (1); again, I counted sold at asking as above

Sold below asking price: 10 (6); 3 more sales than last week

Average days on the market: 30 (24); gain of 6 days

Listings to sales ratio: 122/48 = 2.54 months inventory (109/38 = 2.86)

Our thoughts: really quite surprised by the non-increase in inventory in this segment. But I guess it makes sense that those in the low-end would not be hurrying to sell, as they probably can't trade up any longer. Maybe this is the safest segment of the market. Not necessarily affordable, but when you compare the numbers to the average house and condo prices ($521K, $280ishK) definitely better.

I'm beginning to think that the true measure of where this market is headed is coming in the March VREB numbers release next week. Should be interesting. Will the low-end segment be vastly different than the average price segments?

17 comments:

Roger Need said...

I have been doing some analysis of VREB stats. I find that the numerical format of VREB does not lend itself to trend analysis. The sales/listing ratio is not published so I have calculated it as well. Lately, I have been very curious about the supply of RE product (total active listings) versus demand (RE sales). I have plotted this data and extrapolated for the balance of 2007 using data from 2005 and 2006 as a "future predictor".

You can see the results at my site:
www.members.shaw.ca/needinbox

If you have any questions or want further explanation of the graphs please post in this blog. I will try to keep the data updated when VREB releases new numbers. You will note the six month average price started flattening a while ago. The March stats should be very interesting for trend analysis.

Roger

Vicguy said...

If the low end housing isn't moving (which is exactly what happened in 81 before the crash) cause no one could afford to move up or were afraid to be out of the market for fear it is going up and being left behind, then it will be the houses in the $500,000 range that will dictate the market prices. Eventually if the $500 grand places keep knocking off $50,000 to get the sale then then the lower ones can keep their prices firm all they want as they will not sell with twice the house for only an extra $100,000 borrowed.
I know if I was about to stretch myself to the absolute max, I would be buying the nice places in that higher range, and not slim pickens on the low end that need major renos anyway. It will come to value and who has to sell.

Roger said...

vicguy,

I think you are on to something. I have been watching the high end (over 500K)in Fairfield and Oak Bay. Nice houses in the 500-600K range have been slowly selling at close to asking price; 1 to 3 % off list.

The stuff over 600K has not been moving and I have been getting a number of price reductions via my update service. The absence of these high end sales will lower the average price reported monthly by VREB. I checked my spreadsheet and saw that the gap between median and average prices has been narrowing over the last six months.

The other observation is that a pile of 55+ condos have been coming on the market from 300-500K and these aren't moving quickly either. The supply of seniors must be running low!!

I am keeping out of the market until the fall. I think there will be some real deals out there if sales are weak this spring. The speculators, flippers and mortgage poor will start bailing once the market has a reported downtrend.

What did you think of my rolling average graph on my Web site??

Roger

hhv said...

Roger.

"The supply of seniors must be running low!!" had a chuckle over that one...

Your graphs are great; can I add a link on the blogroll?

Vicguy said...

I like the graph roger,really shows the flattening/topping out effect. Now if the buyers would quit being so damn polite and start low balling some of these gougers we might see a nice downtrend develop in this graph. Too many buyers are still desperate to get in the market when they keep hitting the ask price like that,just like buying an overpriced stock.

Roger said...

hhv said

Your graphs are great; can I add a link on the blogroll?

Sure - add the link. We have to get the news out there. The MSM sure won't tell it like it is.

I find it interesting that the stock market gets lots of technical and objective analysis but there is very little done for real estate. The news and TV media reports tend to be real estate agents telling folks how great it is for sellers or buyers (depending on market conditions). There is minimal statistical or in-depth analysis beyond reporting of the real estate board sales numbers.

The average person has more guidance and facts when buying 5K worth of stocks for their RRSP than they do when they are making the biggest purchase of their life - a house. Basing your decision solely on the opinion of an agent, who will only earn a commission if you buy/sell, is not a sound financial decision. Even the most conscientious, ethical agent will be biased to some degree and represents only one point of view.

Roger said...

vicguy said
Now if the buyers would quit being so damn polite and start low balling some of these gougers we might see a nice downtrend develop in this graph.

Its already happening in Oak Bay!!. Visit my website (www.members.shaw.ca/needinbox) for the latest update on Oak Bay. Check out page 3 and see the downtrend in rolling average prices during the last few months. This has not been in the media because VREB does not publish thsi graph!!

hhv said...

Roger,

I found the stats on the CRD to be quite telling. While Lnagford went up over the past 6 months, Oak Bay went down... and surprisingly they're not that far apart anymore.

I won't be moving to langford anytime soon... lookout Oak Bay ancients, low-ballers headed your way.

Vicguy said...

Interesting Oak Bay chart roger, big money is always the indicator of major trends.

Another anecdotal story,got some relatives who sold in Vancouver and made a nice profit over the last few years and were planning to buy an investment property over here and their agent actually said don't buy now,wait 6 months or more. Talk about another sign of the changing of the tides. Even another relative who was an Olympics RE bull has now changed her tune to a bear now too which I figured never was going to happen.

Another anecdotal story is a co-worker who was an optomistic bull, and didn't want to admit prices could ever come down is now clearly a bear and knows the inevitable is going to happen.

Also suprised when we compared stories of people we know of who are maxed out even after many years of owning and still owe more on a mortgage today then they paid for the place 10-20 years ago. I bet there are many more people who have used their homes here as an ATM but it hasn't reared it's ugly head yet,another one of those dirty secrets the industry doesn't want to talk about.Canada's equivalent to the sub prime loans,just a matter of when do these people hit the wall.

Roger said...

hhv,

Thanks for the link on the blogroll. I have updated my site with new info and some links to interesting videos. Now that I am on the Blogroll I will keep revising the stats every month when VREB releases new data. As you said earlier, March will be an interesting month.

Vicguy - your anecdotes were interesting. There are always a few people who catch on early to an emerging trend.

greg said...

Roger,

looked at your graph on supply versus sales. very interesting, it matches something I have been noticing when charting the inventory via snapshots taken while searching all of Victoria over the last year.

I will post a graph of that soon, right now I am trying to get my news aggregator working, so once I do that I will add some new content - including that graph.

Your graph is pretty imilar to this one from VREB, which tracks increase in inventory versus sales. Check the chart at the bottom of the page.

During the big run-up in prices in 2005, there was a lot less inventory obviously.

As long as inventory increase outpaces sales, something eventually will have to give, as there was significant inventory in 2006 that never did sell.

Roger said...

greg said
Your graph is pretty similar to this one from VREB, which tracks increase in inventory versus sales. Check the chart at the bottom of the page.


I generated my graph using the data in the VREB graph plus the monthly sales data. I found that by showing the data on one graph, rather than two, it was easier to visualize the increasing supply-demand spread. Once I got it into this format it was easy to try extrapolating using 2005 and 2006 data.

Greg it will be interesting to see what happens over the next few months. If the supply of houses keeps increasing and the number of sales stays the same buyers will not be in a hurry and will offer less (with the odd lowball). If supply and sales drop back to 2005 stats then the media will report less sales and a cooling market. Speculators will try to bail and prices will drop. I just can't see prices increasing much more under any scenario. I would appreicate any opinion to the contrary.

Another observation. Did you see all the big, colour ads for condos in the homes section of the newspaper this weekend? Am I imagining that there were more than usual? Are they running out of folks wanting 1 and 2 bedroom, under 1000 sq. foot, units??

greg said...

Sorry about the PDF link HHV, maybe you can delete it, it doesn't seem to be working.

Anyway, the link can reached by clicking here and then clicking the "Active Listings, New Listings and Sales Graphs" link partway down the page.

Also, thanks for the link in the blogroll, I appreciate it.

Roger,

even some of the perma bulls I rant to about unsustainability and unaffordability seem a little less sure about their counter arguments these days.

If the average owners have re-mortgaged or drawn out a lot of their equity, it will definitely make some owners sticky on price -
but if inventory outstrips demand, then certainly these will be the houses that just sit.

I haven't seen the paper today, but the local real estate industry is looking for a big spring bounce, so a lot of advertising is to be expected.

The interesting thing is, even with higher prices, there were hundres of less sales last year, so already some realtors who are on the margins are being pinched or squeezed out.

VictoriaREBear said...

"I just can't see prices increasing much more under any scenario."

Oh, but you haven't talked to our local experts on real estate investing, "The Brailsfords". Here's what these two savvy Victoria realtors had to say in the latest "Real Estate Victoria" magazine about the possibility of price drops in Victoria (notice the incisive analysis and cutting wit employed by this pair of savants in silencing us cry-baby, bitter-renter bears):

"PRICES WILL DROP IN VICTORIA!! WHEN?

1. The federal government removes the GST on new homes.

2. The provincial government removes the PST (sic) on used homes.

3. The taxes are removed from building materials.

4. The prices drop on wood and copper.

5. Unions take a drop in labour.

6. Victoria's golf courses are developed into subdivision.

7. The farmers start retiring in Crooked Creek, Saskatchewan.

8. God makes more land.

Better pack a large lunch for a long wait! In eight years, they will be double what they are now!"

I feel like cutting out that ad and bringing it to
the attention of these buffoons in two years, if they are still in business.

Roger said...

vicguy said,
I bet there are many more people who have used their homes here as an ATM but it hasn't reared it's ugly head yet,another one of those dirty secrets the industry doesn't want to talk about.

Here is a recent quote from a Vancouver Sun article on  refinancing concerns in Canada

"Healthy credit creation, notably mortgage refinancing, relates to the main upside risk to the domestic economy as identified by the Bank of Canada - that consumer spending is stronger than projected due to borrowing against increased home equity."

A boom in Cdn. home refinancing was predicted in this recent press release

hhv said...

We've been watching strong retail spending for at least two years now. Is the BoC now saying that the real spending is about to start because the average joe has finally woken up to the HELOC? What utter crap. Given the massive amount of new car sales over the last 3 years-which outside of a home is most consumer's biggest purchase-and the subsequent hurt that industry is feeling these days, I'd say the HELOC has already been done.

Something will give. Prices are flat right now, and have been for the most part for the last 6 months. Even with the boom in sales between December 2006 and February 2007 there was no coresponding price gains... in fact, the RBC report says that 'affordability' was increased slightly: I guess that's bankers speak for a slight price decline.

I'm at work this morning speaking with a co-worker who is also shopping around for a place. She and her husband spent one w/e at it, looked at each other and said, we'll be back when this place is either updated, or reduced by $50K. We need more people like this shopping.

Anonymous said...

sorry to get off topic here but does anyone know what "adjustments" mean with respect to real estate transactions? Our realtor sent us a list of properties for sale that also included a section on properties that recently sold. Next to the selling price was another price under something called "adjustments". Looks like after your offer is accepted the price of the home is then "adjusted" up or down depending on the specific condition of parts of the home or property. Has anyone heard of this? Does this mean that after you sign a conditional agreement at one price you can then be stuck paying a higher "adjusted" price... sorry if this is way off or sounds dumb but we are ftbs and have never heard of this.