After the shock of March Market Madness wore off the past 24 hours, I thought it prudent to start digging and see just how 'off' my internal predictions were.
As a bear, I wanted to believe that the market was correcting. Were there any real signs of this? Or was it purely wishful thinking?
This chart that compares actual sales to new listings, not total listings suggests that this market is experiencing a rising number of sales and a rising number of listings. The language in the market update would suggest that its a good time to be a buyer and a good time to be a seller; after all buyer-choice is rising while prices are going up too.
If we look at last year, we can see that May was the peak month for both sales and new listings. Can we assume the same for 2007? Beginning in September 2006, the market started to trend downward. Left-overs from the Spring/Summer selling frenzy were either coming off the market or sellers were taking less, leaving some of us to think that the upswing was over. February and March 2007 demonstrated otherwise. If you could afford not to sell your home, there was a good chance you could wait for top-dollar.
But what if you'd already bought and you'd lose your new home if you didn't sell your old one? There was a good chance that this factor is attributable to the slight decline in average prices over the last 6 months of 2006.
Yesterday in the TC, there was a 4-page RE market pump. I have to admit, it was some of the more balanced reporting on RE market conditions I've seen in a while.
Here's the headlines and some quotes:
Historic low rates expected to continue
"inflation isn't a big concern but a recession is possible" US FED
"The economy is weakening quite rapidly and could even be close to a recession as we speak" Nick Majendie, Chief Portfolio Manager, Canaccord Capital
"rates will fall a bit but could spike at any bad news" Aron Gampel, Deputy Chief Economist, Scotiabank
"interest rates are expected to drift moderately higher this year and next" Paul Ferley, Assistant Chief Economist, BMO
"there has recently been some dampening of housing demand, which could have an impact on construction and house prices" Paul Ferley, Assistant Chief Economist, BMO
Seems as though Paul is right, as CBC states: In the residential sector, permit values declined 17.8 per cent to $3.0 billion, the lowest since March 2005.
And now for some anecdotal evidence in the low-end segment: 8 new listings and 4 price changes and that's just the condos. We're seeing prices all over the map too. I would venture a guess that price compression isn't taking hold in the low-end condos. Two-bed, 1+ bath places, all in relatively similar neighbourhoods are seeing price fluctuations between $189K and $249K for product that is very similar.
Maybe the condo market will be the first to slip? As the VREB has already indicated.