Below is the recent update from the Teranet–National Bank House Price Index™ regarding March 2009 prices (the index runs two months behind):
“Canadian home prices in March were down 5.8% from a year earlier, according to the Teranet-National Bank National Composite House Price Index™. It was the fourth consecutive 12-month decline. March was also the seventh straight month in which the composite index was down from the month before – the longest run of monthly declines since the beginning of index coverage in February 2000. The composite is now down 8.5% from its peak of last August.In Calgary, prices have been correcting for well over a year now – since August 2007 – and are now down 12.7% from the peak of that month. Calgary has shown monthly declines in 16 of the 19 months posted since then, including every month from last July through March.
All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given at www.housepriceindex.ca . This is a similar methodology to the US Case-Shiller Index.
Comparing House Price Index to MLS® Prices for March 2009
Calgary average MLS® prices for SFH were down 11.41% year-over-year in March, and down approx 17% from the peak recorded in July 2007. Median prices for SFH are down about 14.5% from the peak (March 2009 : $375,000 June 2007: $439,000) So it looks like the House Price Index is tracking closer to the Median MLS® sales price, currently at only about a 2% difference. (12.7% drop from the HPI peak in Aug 07, compared to a 14.5% drop from an MLS® Median peak in June 2007)
click to enlarge
Hi Mike,
Funny you should bring up the US Case-Shiller Index. Yesterday on CNBC the NAR were dismissing the 18.x% drop in YoY prices in the USA based on the fact that the US Case-Shiller Index was “2 months old data and now sales are really moving”.
Also pay attention to what is happening to the 10 and 30 year US T-Bill. They are going up and mortgage rates along with it by .25-.50%
From what I understand, Canadian mortgage rates are linked to the same bond.
Mike
Hi Mike,
I don’t put much stock in NAR’s commentary, especially after some of David Lereah’s interviews.
Regarding the link between Bond yields and fixed mortgage rates, the CanadianMortgageTrends blog does a great job keeping us up-to-date:
May 28th Post
May 21st Post, etc,
Calgary is the most over-valued real estate in Canada by 21.5%. The TeraNet Housing Price Index is showing this.
Further, if you take the estimated median-household income (from statscan 2006 extrapolated to 2009), which is roughly $90,000/yr, and you plug this into a more traditional mortgage calculator (6% over 25 years 5% down), the median price for Calgary is about $300,000 give or take $10,000. That figure is also 20% lower than the current CREB median as of May 2009.
So, both the TeraNet Housing Index _and_ “traditional” calculations point to another 20% leg down for Calgary.
I think the recent “surge”, if you can call it that, in sales is merely at the bottom (sub-$300k), and is more of a deadcat bounce than a “buy now or be priced out forever” syndrome. So many people were priced out since mid-2006 that 1st timers are jumping in with 35 year low-rate mortgages. Over the long-term, these people will find they grossly overpaid for their property.
Of course, I could be wrong because everyone knows “the world is running out of oil” and “it’s different this time”. LOL.
What do you think of the inflation impact (because now there’s worry about high inflation)? So although it maybe overpriced now, but is it better to invest in real estate?
Thanks,
Rachel