Thursday, October 20, 2011

More Animal Spirit analysis

You may recall this post from a couple weeks ago where Animal Spirit gave us some insight into what's happening in the low end SFH market. He's given us some more great analysis demonstrating how, despite average reported pricing being relatively flat, the median, and in reality, resale home prices are dropping, and in some cases significantly.

The graph below shows you the listing prices over the past couple of years, plus a few months. Most of the analysis below is Animal Spirit's word for word.


Quite striking is the run up at the higher end of the market in fall/winter of 2010, followed by an equal decline. The same decline to pre-January 2009 numbers hasn’t occurred yet for the median, 25 or 10 percentile listing prices, but there is a clear downward trend since the beginning of June. Also interesting is how the median sales price tracked the 25th percentile for a year, and then diverged upwards (indicating that sales distribution became more high-end than low-end at that time). Expect the median to revert back to the 25th percentile bar at some point in the next while (bringing with it substantive, but not actual, reported drops in median sales prices). Data is not inflation adjusted.

Here's the data in another form:



The table shows the decrease in percentile listing prices over the last year, 6 and 3 months, all annualized.  Basically it shows that a person will have saved $24K by not having bought the median listed house last year. Add to this another 4K for inflation on a 20% down payment and the buyer has saved $28K by now – a pretty tidy sum.

If the current trend on lower end houses continues for a year, then the 25th percentile house that list for $515,000 in July would be listing for $58,000 less (or $457,000) in a year’s time (wiping out a fair sized down payment). There is no solid proof the downward listing price trend will continue at the same pace, however with the entire distribution shifting lower, there is virtually no basis to say the price for the same house will increase.

That the rolling median sales price (not inflation adjusted) is up 1% over the year while the median list price is down 5.4% shows that the relative quality of houses sold has increased rather than the actual price of the same house. In other words, people are buying a better house for the same coin.

A quality Case Shiller metric in Victoria would be miles better than having to analyze percentiles from manually searched data, but this is one way to try to replicate the results.

All analysis above is based on what shows up as ‘Victoria’ for a MLS search, mostly excluding the outlying areas, in particular places like Sooke where prices have likely been going down for longer.

36 comments:

Mindset said...

Great stuff HHV and Animal Spirit. The unbiased information you are working so hard to provide is absolutely fantastic.

Keep up the good work.

a simple man said...

Thanks animal spirit - this is the kind of data we need to here more of. On the image, there are some problems with the x-axis - dates seem reversed.

Animal Spirit said...

a simple man (and mindset) thanks - dates are correct on the graph - left is most recent.

a simple man said...

OK - I get it. Either way I like what it says!

Trilobite said...

Hi Animal Spirit,

That's a very nice graph indeed! Many thanks for the effort! It will be really interesting to see how this looks in a few months time.

patriotz said...

Great research and analysis, thank you.

Basically it shows that a person will have saved $24K by not having bought the median listed house last year.

That's just the savings in purchase price, there is also the savings in renting versus mortgage, taxes, etc.

Just Jack said...

Nice graph, Animal Spirit.


You probably noticed that the number of sales per month and the number of sales in the 3 month rolling median have dropped off substantially.

When the market was hot, you could easily get 500 sales to determine a median, now its half or even much less especially during the winter months and in the Western Communities where you need to use a median covering 6 months in order to get enough data not to skew your results.

Looking at the graph, and seeing how the lines for the different percentiles rise and fall almost in unison, and taking into consideration the affect of fewer data points (as mentioned above), would it be correct for one to conclude that the top ten percentile (the uber rich) are affected by many of the same factors as at the middle or lower price levels?

Could one also speculate that the graph demonstrates how people have been selling in the lower priced communities and buying in the relatively more costly inner city neighborhoods? That the quick up and down rise for the top ten percentile was indeed a micro "bubble" or burp in prices for the higher priced properties.

And then speculate that people that are selling in less desirable areas and buying in the more affluent neighborhoods, in order to protect their wealth, are actually accomplishing the opposite. There selling in a relatively low market and buying into a frothy and temporarily over priced high market.


Oh well, need more coffee...

fatjay said...

Great research Animal Spirit. I will be very interested to see how the curve on the new Teranet index compares. Hopefully that is out next week already!

Zidane said...

Regarding Scott Rd, perhaps it wasn't an unconditional offer and the thing fell thru when they discovered the oil tank buried in the yard?

ArtVandelay said...

Proud Renters. This is encouraging. We need more of this talk in Victoria.

http://youtu.be/ywYipiziaXw

Marko said...
This comment has been removed by the author.
Marko said...

http://youtu.be/EMG0dL1w_Yc

Introvert said...

http://youtu.be/EMG0dL1w_Yc

I enjoyed the part where, when asked why house prices are so high, all the random people on the street said it's because Victoria is the nicest, mildest place to live in Canada. Damn straight.

Michael said...

"Pay to play, pay to enjoy, pay a premium"

We choose "not" to pay to play. By paying two-thirds less, we have triple the income to invest and enjoy. Once it's at least a third less to own (2020?..they always overshoot to the downside) we will wisely choose to own again. Me and my sugar dumpling are such smarty-pantses.

Leo S said...

all the random people on the street said it's because Victoria is the nicest, mildest place to live in Canada.

I especially enjoyed the part where they were huddled under their umbrellas in the downpour saying that :)

Introvert said...

I especially enjoyed the part where they were huddled under their umbrellas in the downpour saying that :)

True enough!

It's not that Victoria is so nice; it's more that the rest of Canada is so terrible.

But the thing is, most folks want to stay in Canada; and mildest place in Canada is basically Victoria. Everything is relative!

HouseHuntVictoria said...

The streeter interviews only confirm to me what we've been saying all along here: it's locals who drive up the prices. Right or wrong in their beliefs, collectively, Victorians and Victorians primarily are responsible for Victoria's high home prices: it's not the from-aways coming here who drive up prices, it's the people already here.

Leo S said...

It's not that Victoria is so nice; it's more that the rest of Canada is so terrible.

Not at all. Tons of places are awesome in Canada. Maybe you should go see them. Just don't expect them to be the same as here. Seriously, real seasons rock.

Leo S said...

Check out 2868 Glenwood. Assessed for $686,000, it was listed 140 days ago for $709,000, then reduced to $630k at the end of august and just now down to $550k!

Either waterfront is really not in demand, or that seller/realtor are high as kites with their pricing.

Phil said...

I alomost fell off my chair when they asked that one person why prices were so high and they responded: "Because people here are delusional about rising values and the banks play along thanks to the CMHC taxpayer backing".

Oh wait, that got edited out. Sorry about that.

Dave said...

LEO S
Re: Glenwood
I think there is a reason there is no inside pictures,
I am curious what its like inside.

Dave#1

Leo S said...

I think there is a reason there is no inside pictures

For sure. I would assume it's a teardown.
But what was the logic behind starting the listing at almost $160,000 more? Hard to believe someone is that deluded about the market.

a simple man said...

In Saskatchewan - talking to friends last night - they are telling the story of much jobs in SK. Many people moving in from Calgary from work. I know two people personally moving back for good jobs with homes in Calgary that they won't sell but are renting because if they sold now they would lose money - say they are waiting for things to improve.

Marko said...

In regards to Glenwood it is a teardown. Why hasn't it sold? Probably price. Lot 4 - 1190 Rhoda lane just went for $490,000 + HST and it is a pretty damn nice waterfront lot.

Sweetrealtor said...

I've seen 2868 Glenwood. If it isn't a teardown, it's pretty darn close. Also the view isn't very good, mostly blocked by a big Garry Oak, and it's butted up against Admirals Rd.

Definitely delusional pricing at the start. Getting close to a realistic price now.

Just Jack said...

Sure Glenwood is a teardown.

Problem is..... they never tear them down.

So can anyone tell me what happens if they do tear this home down? Will they have to have an archaeological assessment? And how much will that cost?

Marko said...

Monday, October 24, 2011 8:00am

MTD October
2011 2010
Net Unconditional Sales: 358 467
New Listings: 799 976
Active Listings: 4,538 4,046

Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year

Marko said...

SFH Average = 595k
Condo Average = 314k

patriotz said...

"I know two people personally moving back for good jobs with homes in Calgary that they won't sell but are renting because if they sold now they would lose money"

They are already losing money every month because of the terrible rental yield on the market price of the property (which they could realize by selling now). Opportunity cost.

That's in addition to the bigger capital loss that they'll get when prices fall some more and they finally give up hope and sell.

Calgary is the perfect example to throw in the face of RE bulls - if prices can fall there, in Canada's strongest economy, they can fall anywhere.

a simple man said...

patriotz - I agree. I told them sell now at a small loss or or be forced to lose more later. They did not believe me for a moment.

Nancy said...

Is there an unusual amount of contractors/builders in Victoria?

I know this is a fact for RE agents but every driveway in the city seems to have a truck with contractor on it.

It seems to me that many many people are riding the RE wave here.

a simple man said...

Nancy - I have long thought this fact as well. To me, this creates a scenario of rapid losses once the big dip begins (I think we can all agree we are now in the slow dip).

Just Jack said...

I'm in agreement with the previous posters. We are in the slow dip right now. There is a lot of denial with people hoping that the market will rebound so that they can sell.

The same thing happened last year with enough people taking their homes of the market, that prices were stabilized. But that does not seem to be happening this year. The months of inventory in Victoria is rising and is now over 6 months.

With three years of flat prices, more people are willing to take a small loss this year rather than wait for a unlikely rebound.

Just Jack said...

Why is it that when you miss type a sentence it seems to always be the most critical word.

...enough people taking their homes OFF the market....

I need a bigger screen or thicker glasses.

Alexandrahere said...

Morning all. For the week of 17 Oct 23 Oct: Within my criteria in the municipalities of Vic,OB,Esq,SE&SW; there were 20 SFH sold. The med price was $540K & the Avg price was $547K. 65% (13) of them went for below BC assessment. For condos and townhouses in the same area and within my criteria, 8 sold with 7 of them or 87.5% going for below assessment.

The same week last year i.e. 18-24 Oct, with the identical criteria, there were only 11 SFH sold compared to 20 this week. The avg price was the same at $547K.

Unknown said...

I think Teranet uses the same methodology as Case-Shiller. Victoria is covered now.