REALTORS® cave

Recognizing they're bringing a butter knife to an aerial dogfight, the CREA (umbrella organization of Canadian REALTORS®) have agreed to step down from the shoving match and accept the fact they've been running the MLS® system in an anti-competitive manner:

In a development that could drastically change the way Canadians buy and sell their homes, the real estate industry has reached a landmark agreement with federal competition authorities.

The legally binding deal will allow for home sellers to pay for only those services they want from their real estate agents. Previously, under the rules established by the Canadian Real Estate Association (CREA), consumers had to opt for an entire slate of services, a practice the Competition Bureau deemed anticompetitive.

Says one lawyer who wanted to access the MLS® system without acting as a full-service REALTOR® for his clients: 

“This is precisely what I’ve been fighting for for the last decade,” he said. “That the consumer and real estate agent get to decide the framework of their relationship without having CREA and their local boards say certain arrangements are not appropriate for MLS.”

It's still early in the big schemes of this new development. But two things remain: the CREA's claims against the Competition Bureau regarding agency weren't strong enough for the CREA to spend money defending and the Competition Bureau didn't feel it necessary to push the CREA to allow non-REALTOR® access to MLS® listings. Simply put, as far as I can tell, you'll still have to use a licensed REALTOR® to list your home on MLS® and that REALTOR® will still have the option of not charging a flat rate or simple MLS® listing fee if said REALTOR® believes they can make a living without offering that basic service. 

Time will tell, along with the details of this new agreement, but I'm not sure this development creates the conditions necessary for drastic change in the way Canadian consumers buy and sell homes.

(H/T Mr.4AM for link)

Monday market update

Numbers courtesy of the VREB via Marko Juras.

Month to date September 2010. (2009 September numbers in brackets)

Net Unconditional Sales: 306 (776)
New Listings: 1,002 (1,129)
Active Listings: 4,181 (3,419)

Price Original = $649,357
Price List = $635,443
Price Sold = $612,296

SFH average days on market = 56

Price changes last week = 203

Sales volumes jumped last week. If the next three days play out similar, it won't be impossible to surpass 350 for the month, perhaps even hit 375. Regardless, this number can only be called disastrous as it is less than 50% of last year's numbers and still marks a 20-year-low for September sales volumes.

Due to the low sales volumes, average price reporting is going to be extremely volatile. In August, $586,000 was likely reported too much as a "drastic drop" without the corresponding explanation "lack of high end sales" skewing the average down. In September there have been considerably more expensive homes selling dragging the average back up - somewhere near $610K. The truth likely lies somewhere in between.

Double-Agent market update

Here are the weekly graphs of market conditions based on VREB data.

Sales stayed in the doldrums with only 67 pending sales reported in the last week. Active listings rose which is not the typical September pattern.

September is shaping up to be a sales disaster unlike anything seen in the last 10 years.

New listings increased which is unusual for this time of the year.

VREB only reports sales and listings on a monthly basis. We calculate a running total of the last 4 weeks every Monday.

The overall months-of-inventory now exceeds 12 which is almost 3 times the level seen in Sept. 2009!! The sales/new listings ratio has also taken a nosedive this month.

Sellers are now under pressure to lower their price expectations if they want to sell. The few buyers out there can take their time, be choosy and can grind hard when making an offer. Under these conditions prices will undoubtedly keep falling for the foreseeable future.

HHV note: The above is quoted directly from Double-Agent's comment in the previous post, the graphs are from his work. Contributions from readers are what make this blog what it is. I'm extremely grateful for the contributions of commentators. 

Times Colonist misleads again

Today's story about housing construction starts increasing is completely out of context with current market conditions.

Sales volumes can only be described as disastrous. Average prices, including average prices for new construction, are falling.

Yet builders started more projects in August of 2010 than in August of 2009 - so "logically," the Times Colonist implies through it's headline: Victoria's housing market improves

Um, no. It hasn't. It's actually getting worse. What happened, and the headline you should have written, is Victoria housing starts increase from one year ago.

Monday market update

Numbers courtesy of VREB via Marko Juras.

2010 (2009 September monthly totals in brackets)
Net Unconditional Sales: 185 (776)
New Listings: 779 (1,129)
Active Listings: 4,214 (3,419)

There are nine business days left in the month. Will sales volumes hit 300?

Prices are falling quickly, although the average price as reported by VREB will likely show a monthly increase in September from August.

Here's a snap shot of price action in September, again courtesy of Marko.

Price Original = $643,469
Price List = $630,605
Price Sold = $606,730

Sellers are accepting offers, on average, 6% below their original price.

I'd be curious to know what average days on market is now: 61 says Marko. Correct me if I'm wrong, but that seems to be around a 100% increase from one year ago - I was wrong, as per Marko, 51 DOM was average September 2009.

Real estate freefall

It's not very often we get to compliment the local news on a real estate story. Today we can. This was balanced, honest and had enough different viewpoints from a variety of sources to actually be called news. House Hunt Victoria commentator and local REALTOR® Marko Juras is featured, including a plug for his new 70% cash-back to buyers business model and his very realistic advice for would-be homeowners with no money.

Does "seasonal adjustment" have any place in real estate stats?

I received an e-mail from a concerned reader regarding the Canadian Real Estate Association's most recent claim that sales volumes are up across Canada, led by BC and Ontario. Alarm bells went off immediately when I read BC as we already know that Victoria's sales volume number for August is a 20-year-low. How could that mean that sales were up from July when sales were actually down almost 20% month-over-month?

Are sales booming in other parts of the province? No.

How could this possibly be reported as a positive statistic?

Enter seasonally adjusted data, defined as:

Observations over time (time series data) modified to eliminate the effect of seasonal variations.

Time series data is exactly what we get each month from the VREB: monthly sales statistics. Seasonal variations in the case of local real estate pertain to changes in inventory levels (total active listings, sales volumes and new listings volumes) caused by the seasonality of the business.

Is real estate a seasonal business? We know that Victoria has a pronounced spring buying and selling season as represented by decades of sales statistics. You could make the argument that there is seasonality to the business, much like tourism, because there are months that are traditionally more busy than others.

We also know that when you compare data from say, August 2009 (the month) and August 2010, you're dealing with data from the same month and effectively the same season. Do you need to seasonally adjust the data? No. How about July 2009 with July 2010? No. July 2010 with August 2010? If you believe the summer begins or ends in August, maybe. But really, no.

So why would the CREA and BCREA report sales statistics this way? Because it puts a positive spin on a very poorly performing real estate market.

Different months out-perform other months. You can compare one month to the next, one month of a given year to the same month in previous years and sub-sections of data (e.g. April, May and June) from one year to another. I'm not a statistician or a math whiz by any stretch of the imagination but from a cursory glance I just can't see why you'd want to or need to seasonally adjust real estate sales volumes/dollar-amounts unless you are purposely trying to employ a statistical trick to make data appear favourable.

I know there are several regular commentators here that know far more about stats than I, so I'll ask them to weigh in on this issue in the comments.