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House sales in October: Better, but not quite as strong as reported

NOVEMBER 15, 2012

October resale numbers are out.  In general, the sales trend picked up in most metros relative to September, but the improvement was not quite as sharp as reported.

If we go back to September, it was unusual in that it was bordered on each end by weekends, meaning there were only 20 weekdays in the month, a fact pointed out by most real estate boards when it was revealed that sales had plunged relative to previous years.  And it was a very fair point, and one that I acknowledged in a couple articles.  October repaid the favor by having an unusually high 23 sales days in the month, a fact that wasn't nearly as heavily touted as the lack of sales days in September.

So to be fair, I thought I'd present a quick look at the past 10 years of sales data for Canada and each metro region, but I've adjusted each year to show the sales per week day, as this is ultimately the most valid comparison.  Note that the sales data is not adjusted for population growth.  All things equal, sales should have an upwards bias as population grows.  Details below:

Some very general thoughts:

Vancouver: Sales rebounded nicely from the abysmal readings in September, but all things are relative.  High inventory and sales that, while better than last month, are still nearly a third below decade averages does not bode well for near-term price stability.  I'll be discussing these latest trends when I'm in the city later this month.

Calgary:  Still by far the best looking metro.  Little on the supply/demand front to indicate any near-term price weakness.  It's definitely been the most volatile metro for sales historically.  Interesting to see that 2012 came in only in line with decade averages, in spite of the eye-popping y/y increase in sales we've been accustomed to reading about.

Toronto:  Same old story- Weakness in the condo market, strength in the single detached market, a trend I suspect will continue.  Overall, sales are trending lower, and an 18% y/y decline in sales coupled with a 17% y/y jump in MLS listings shouldn't be shrugged off.  There's a message there.

Ottawa:  The weakness in this market is misleading from the chart, which shows sales coming in at decade averages (-8% y/y).  The real story is in the inventory build in the city, where October new listings once again came in at decade highs (a trend now intact for 8 straight months) and the sales/new listing ratio once again came in at decade lows.  Ottawa continues to closely guard their MLS inventory numbers (shamefully, the only real estate cartel to do so), but I still suspect the weakness in this market will go mainstream in early 2013 unless current trends reverse.

Montreal:  Still absolutely ugly and no one is discussing it yet.  The sales chart speaks for itself, but coupled with current MLS inventory that is at by far the highest level ever for the month, this is a market in serious trouble.  Expect the issues in this market to also go mainstream in early 2013.

 

Cheers,

Ben

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Ben Rabidoux
By Ben Rabidoux

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13 Comments

  • Jason said:
    • 1 year, 5 months

    Why is it that you would expect more weekdays would equate to more sales? Most open houses occur over the weekend, so I would think the opposite would be true.

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  • Ben Rabidoux said:
    • 1 year, 5 months

    Tell that to CREA, who seasonally-adjusts their data, with the largest adjustments due to this factor.

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  • Michael J said:
    • 1 year, 5 months

    " I'll be discussing these latest trends when I'm in the city next month."
    That would be this month :) I have the ticket and can't wait to be there!

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  • Ben Rabidoux said:
    • 1 year, 5 months

    Ha! Yes....thanks for the correction. See you in two weeks!

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  • Kevin said:
    • 1 year, 5 months

    "Note that the sales data is not adjusted for population growth. All things equal, sales should have an upwards bias as population grows."

    It would be a bit of work, but I would like to see sales data adjusted for population growth. Or how about sales per realtor? October's sale data would get just a bit more interesting.

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  • rp1 said:
    • 1 year, 5 months

    True but you'll be disappointed. Population growth isn't high and hasn't been. There has been enormous hype.

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  • John Berkowitz said:
    • 1 year, 5 months

    It is the sales that is dropping, but the sellers still believe they will find someone crazy enough to pay their price. It is hard to say what is happening right now, especially when there are many tricks with the MLS. What I can observe is the change in the behavior of the buyers. They take more time to decide whether they want to buy or not. As I have read in the article about the slowing housing market in Vancouver, it seems that 58 % of the Metro Vancouver residents do not think it is a good time to sell. Let´s see what effect this will have on the listings during the winter. I think that the general problem is that everyone expects to win now, but the number of "winners" is quickly dropping down.

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  • george said:
    • 1 year, 5 months

    I haven't heard any discussion by the economists and politicians about the tidal wave of debt that is engulfing this country.

    The following information is from a Statistics Canada credit market summary data table as of the end of June 2012: (The debt statistics for Canada up to the end of September 2012 will be released in about 4 weeks by Statistics Canada).

    Total debt in Canada as of the end of June 2012 (bottom line of the data table) was 5.1 Trillion $

    From the end of June 2011 to the end of June 2012 the total debt in Canada increased by 209 Billion $.
    For that 12 month period the total debt in Canada increased at a rate of approximately 572 Million $ per day.

    I would have to agree with Karl Denninger when he said (a few years ago) "You cannot expand credit at a rate faster than GDP forever without suffering a financial panic and collapse".

    http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3780122

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  • Greg said:
    • 1 year, 5 months

    I haven't heard any discussion by the economists and politicians about the tidal wave of debt that is engulfing this country.

    Because they know there's no intention to pay pack that amount debt.

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  • Farmer said:
    • 1 year, 5 months

    It baffles me how anyone could say that we Canadians are a prudent bunch, George. We have collectively been spending like a bunch of drunken sailors and have frankly spent are way right intio a great big hole with little regard for global macro events. We are not better than anyone else really....just later to the party. In that sense our timing could not be worse as a global slowdown seems assured at the perfectly wrong moment for us and this magnifies the worries on the down side. Few want to discuss it openly, preferring instead to keep repeating the "soft landing" mantra. They wish. I have been a bit surprised by how candid a couple of our banks have become in the last while although they were certainly late to acknowledge the reality of an impending slowdown.

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  • Laurent said:
    • 1 year, 4 months

    On the fundamentals, Montreal does have one thing going for it: the lowest ownership rate in the country. Thus, there is a large pool of possible entrants in the housing market.

    In 2006, Quebec also had a low percentage of homeowners with shelter costs over 30 % of income (including condominiums). Montreal also had the lowest percentage of condo owners as a proportion of homeowners in Canada. Ceteri paribus, this favors a softer landing than in other provinces.

    That being said, I agree with Ben that labor markets are very exposed to housing-related activities and that strong negative feedback could wreck the housing market. On the other hand, the provincial government is planning a massive infrastructure revamp that could compensate for loss of residential construction jobs. The low vacancy rate in Montreal offices will also bring some support to the construction sector.

    (source for stats: http://www12.statcan.gc.ca/english/census06/analysis/shelter/pdf/97-554-... I did not find the stats for 2011 )

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  • Brenda said:
    • 1 year, 3 months

    As a long time appraiser in the Calgary market, the graph on Calgary looks about right. Good properties have almost come back to their post crash values. There is , however, a paradigm shift underway in the market . Commute times and demographics is pushing up inner city values. Properties with negative values such as poor commute times and large size not recovering though. I always treat the condo market as a separate market... I say they are the last to go up in a boom market and the first to go down in a falling market. Calgary is becoming very expensive to live in for the average or low income worker. Rents are rising and apartments are scarce so a big scramble is underway into cheap far out condo apartments. Since interest rates are not going up, I expect Calgary to have about a 12 month run before the excesses , overbuilding,speculation and rising construction costs force a correction.

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  • Brenda said:
    • 1 year, 3 months

    As a long time appraiser in the Calgary market, the graph on Calgary looks about right. Good properties have almost come back to their post crash values. There is , however, a paradigm shift underway in the market . Commute times and demographics is pushing up inner city values. Properties with negative values such as poor commute times and large size not recovering though. I always treat the condo market as a separate market... I say they are the last to go up in a boom market and the first to go down in a falling market. Calgary is becoming very expensive to live in for the average or low income worker. Rents are rising and apartments are scarce so a big scramble is underway into cheap far out condo apartments. Since interest rates are not going up, I expect Calgary to have about a 12 month run before the excesses , overbuilding,speculation and rising construction costs force a correction.

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