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.