IMF wakes up: Canadians shouldn't socialize mortgages

Is this a case of stupid housing policy begets stoopid housing valuations?

The IMF, big bureaucracy accountable to no one that it is, in its infinite wisdom points out that Canadian home prices *may* be out of whack with reality given that people who pay taxes to the government of Canada just also happen to be on the hook for a lot of the day to day mortgage lending decisions of the mortgage industry in Canada (give or take a lot here or a lot there depending on the government oversight of the day, or not).

The IMF, of course, says Canada's home prices are the most over-valued anywhere in the world.

Cheap mortgage rates and banks' tendency to give money to folks they otherwise wouldn't because Joe Public will bail them out regardless has a way to do that to a market.

Perhaps the most salient observation in the IMF's pontification: “We suspect the fact that banks may benefit from government-backed insurance on mortgages (…) it sort of makes it easier for banks to do mortgages than other kinds of lending which presumably, we think, is going to be more useful for the real economy.”

It's not like Canada wasn't warned before... like in 2008 by an anonymous schlep living in his parent's basement in Victoria because, despite an above average household income, he and his wife couldn't afford much more than a crack shack in a shady Vic West 'hood. 

Nov 18 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

	November 2013				November  2012
	Wk 1	Wk 2	Wk 3	Wk 4
Unconditional Sales	140	224			366
New Listings	276	408			706
Active Listings	4118	4077			4488
Sales to New Listings	51%	55%			52%
Sales Projection	490	428
Months of Inventory					12.3

It's interesting to keep on eye on the mortgage industry insiders, and they're getting nervous again.  According to Rob McLister at CMT, "We’d submit, however, that there is no need to wonder if we’ll get new mortgage restrictions. It’s a given that more regulations are coming. The only questions are what rules to expect and when."  These possible upcoming limitations might be more obtuse to the average consumer, but the effect is the same: reduced access to credit.

Nov 13 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

	November 2013				November  2012
	Wk 1	Wk 2	Wk 3	Wk 4
Unconditional Sales	140				366
New Listings	276				706
Active Listings	4118				4488
Sales to New Listings	51%				52%
Sales Projection	490
Months of Inventory					12.3

Teranet out and it is turning negative again.  With the strong growth in the Alberta housing market we are no longer just almost the weakest market in the country over the last 5 years.

Up in Rupert right now where you can buy this beauty for $39,500,  and the most expensive house currently for sale costs $459,000.  It sure rains a lot, but the place has it's charms, with a mix of Cowichan Bay, Victoria, and east coast..   Time to invest before they put in the pipeline?

The VREB discovers price skewing

You may have noticed that the VREB has a new trick up it's sleeve.  It's the MLS Home Price Index (it's a home silly, not a house like that heartless Teranet index says).

The MLS HPI is a repeat-sales index quite similar to the Teranet index.  However unlike the Teranet, they separate it out into "benchmark" single family homes, townhouses, and condos.  They also have separate data for the various regions, not just greater Victoria as a whole.

With this new information, the VREB has come to accept the skewing of medians and averages that we've talked about here for a few months already.  “Past reporting of averages and medians showed flat pricing across the Board’s trading area but MLS® HPI indicates a moderate decline in prices in many markets over the last year,” says VREB's Shelley Mann.   
So prices continue their slide at a rate of 3-5% a year depending on where you live.

Overall the HPI tells us nothing we don't already know.  Prices on a slow downward slide since 2010.  Victoria the weakest market in the country.  Over 5 years, prices are down 5.6%.

Update:   So how does the new MLS HPI compare to our existing measures of the market?   Pretty similar, but surprisingly the MLS HPI is the most pessimistic of the bunch.  Note that this is the SFH median, while the two indices are comprised of all properties.

Based on the SFH median we are down about 8% from peak.  According to the Teranet we are down 5%, and the MLS HPI says we are down 8% as well.

Oct 28 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

	October 2013				October  2012
	Wk 1	Wk 2	Wk 3	Wk 4
Unconditional Sales	89	214	319	433	373
New Listings	240	444	650	828	1068
Active Listings	4408	4390	4369	4338	4876
Sales to New Listings	37%	48%	49%	52%	35%
Sales Projection	--	546	524	524
Months of Inventory					13.1

Surprisingly enough there is no slowdown in sales yet.  Continued on pace of last week and should be easily over 500 sales at the end of the month.

Some chatter about an article out of Australia which shows Canadian real house prices on a flat line since 1981 and therefore there is no bubble or even the slightest hint of one.  I made the assertion that the data is bullshit, and here are some more details about why.

First of all, the article references the BIS database of house prices as a source.  Looking at that database, they use the New House Price Index from statscan.

Here's that data for BC, Canada, and Victoria.

Now look carefully at that data and consider that (as best as I can tell), the NHPI is NOT inflation adjusted (they say they use it as a component of the CPI).  That is according to this index, NOMINAL prices for new housing in Victoria are over 20% cheaper now than in 1981.

Of course this is impossible, so there's something else at work here, which is that the data is quality adjusted.  I'll let Ben explain the problem with that (scroll down for the section on NHPI).

The divergence between the NHPI and other indices like Teranet or the average national price really says it all.
I'd say that anyone using the NHPI to make some determination about the valuation of real estate in Canada is going to come to the wrong conclusion.

Oct 21 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

	October 2013				October  2012
	Wk 1	Wk 2	Wk 3	Wk 4
Unconditional Sales	89	214	319		373
New Listings	240	444	650		1068
Active Listings	4408	4390	4369		4876
Sales to New Listings	37%	48%	49%		35%
Sales Projection	--	546	524
Months of Inventory					13.1

As always, we are on the descending slope for sales. Even so we might almost hit 500 this month, which would put us at an MOI of about 8.5.   Still firmly in buyers market territory, but not quite as extreme as last year.

Oct 17 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

	October 2013				October  2012
	Wk 1	Wk 2	Wk 3	Wk 4
Unconditional Sales	89	214			373
New Listings	240	444			1068
Active Listings	4408	4390			4876
Sales to New Listings	37%	48%			35%
Sales Projection	--	546
Months of Inventory					13.1

A strong start to the month.  Don't believe that sales projection as sales will slow down, but there is a real dearth of new listings (active listings still high) out there right now and relatively (to last year) decent sales.   October is about the last month that could be affected by ultra-low rate holds, so either this is the last hurrah or rates increasing are having very little effect.  As a point of reference, last Oct 15th we had only 166 sales and 483 listings, and that was with 2 mondays to that point where this year we only have one month to date.

Had a Jehova's Witness REALTOR® drop off a letter today...

Dear Homeowner,

I am pleased to let you know that the house as <neighbour's address> has just been unconditionally sold.  The property was sold before it was actually listed which is an indication of a strong interest for homes in established areas such as yours.  The offer that was accepted came in close to the asking price and both parties are very happy with the outcome.

Should you have any questions related to this sale or any other real estate inquiries, feel free to get in touch etc and so on.  

Well I guess you don't get in the top 10% of realtors in this market by sitting around!

I do wonder about who is basing their decision to sell their house on what the neighbours are doing, rather than what their own plans are...