SFH inventory has peaked
After eclipsing the 6300 mark in late June, SFH inventory began its descent. The pace of new listings has slowed from earlier in the year and expiring listings are a main contributing factor for the falling inventory. You can see that most listings expire at the end of the month with a smaller spike mid-month.
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Zooming out to a year-over-year view we can see that as high as inventory climbed this year, it didn’t reach the highs of 2008. Sales are lower than this time in 2008 so we might end up seeing inventory set new month-end highs a little later in the year.
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How long does the seller usually wait before he/she relists the property after end of June? 1 year typically?
Just had a though Mike after looking at your graphs. Inventory climbed late in 2007 and into 2008. Is it possible that individuals who owned and bought new listed their original residence into a falling market boosting inventory?
I’m wondering whether we will see the same effect this year as large numbers of homes are completed but owners can’t sell their first place.
I would agree that without some sort of external shock to the system, it is unlikely that inventory will reverse itself enough to reach a new high for the year before the end of December. However, I can imagine a couple of external shocks that could hit the market to spur on some more listings. I’d also be hesitant to say inventories won’t start to rise again when the sales to new listings ratio is less than 50%. With a ratio less than 50%, inventories can fall during periods of declining activity, but that is more difficult during periods of increased activity, and activity typically increases in the fall compared to the summer.
For potential external shocks, first, I’m interested to see what the reaction is when the July numbers are published. Sales will be down again, average and median prices will be down, and the median will be down quite a bit month-over-month. I was recently contacted by the real estate agent that helped sell my house a few months back telling me that now is a great time to buy, but he is advising his clients to pull their properties to wait out this blip in the system. I gave a few reasons why I disagree, but the point I’m trying to make is that there still isn’t consensus that it’s better to sell today than to wait a few months to try to sell.
I’m bearish, like most of the posters on this site, but there is much less consensus among the average buyers and analysts about the direction of housing. Just look at Mike’s previous posts of analysts. Unfortunately for the eternal bulls, bad news has a way of causing people to migrate towards the bears camp. When the July stats hit, I expect we will see a new wave of “this is the end of the housing market as we know it” sentiment to hit the general public. Only time will tell if that is enough to convince enough of the people that pulling listings that waiting for 6 months might be a costly option to change the direction of inventories.
A second potential external shock might have already happened. We’ll see if this most recent round of interest rate rises will force some people with variable rate mortgages sitting on the margin to list.
Third, it looks like people are pulling listings from MLS and moving them to rentfaster.ca. With vacancy rates high and rising and downward pressure on rents, we’ll see how long people are willing to let properties sit vacant before re-listing. Rising variable rates won’t make this wait any easier. Combined with shock #1 and #2, I could see a few of these empty houses hitting the market again.
Like usual, only time will tell.
Mabus
Mabus I agree that prices are heading down in the short term but when you say the media will put out a story along the lines of: “this is the end of the housing market as we know it” I disagree.
While SFH median and mean is down, we are still 6% up year-on-year – you can be certain this will be emphasized in news reports. Prices almost always fall between June and July and even though they fell a bit more this year, it’s not far off from an average drop.
Inventory usually goes up about 8% between June and July month end so we are actually seeing a very rapid decline in that. Add the usual month end inventory drop and we might be down 20% from where we should have been. That’s going to be hard to recover in the later months of the year.
All in all I see prices heading down, maybe spurring more sales and if the rising trend in sales:new listings continues, we may even see a balanced market in a few months.
Jimmy- you could certainly be right about the news. I just find that the flavour of the day is to overreact to news. Bad news is the next signal of the end of the financial world as we know it. Positive news is a sign that we are close to the previous periods of prosperity and peak employment. On any given subject, there are probably 20% of people that are always bulls, 20% that are always bears and the rest that swing in between with some sort of slight bias. It feels like that middle 60% is swinging back and forth violently on the bond, commodity, equity and real estate markets.
You must have a huge dataset to make this statement with the level of confidence suggested:
“Inventory usually goes up about 8% between June and July month end so we are actually seeing a very rapid decline in that. ”
It would be interesting to see the dataset used to derive this conclusion. I would imagine that building permits and net migration would have a strong influence on inventories, so I’m interested if/how these have been normalized in your calculations.
Mabus
Mabus:
The data I have goes back to 2006 for inventory – I’ll admit that’s not much. Sales and listings data go back to 2002 and are more solid. Mike F gave me the database a while back – thanks again Mike.
The price data goes back to 2002 and is consistent. On average, mean declined by 1.4% in July and median by 2.3% which makes it by far the worst month of the year for average prices. Mean SFH price went up in 2 out of the last 8 years in July (by 2000 in 2005 and 9000 in 2007). That’s pretty interesting considering prices went up 6% per year over that period. If you wanted to pick a consistently good time of the year to buy, August 1st would probably be it. This makes sense when you consider many folks are dropping prices and relisting at lower levels then.
By the way I am not advising people to buy this August 1st…
Net migration played a big part this year since Calgary was growing by 2-3% for many of those years but only grew by 0.6% in the last year. On the other hand, we didn’t have the orgy of building that we had in 2007/2008 to add to the inventory this year. If we had had a “usual” population gain of 2%, there’s no doubt things would be different.
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Mike Fotiou says: I just want to clarify that it’s the the month-end stats I provided you with. There would be sooo much trouble if I ever gave anyone the “database”
What is interesting, and especially with condos, is that you can track the mass movement of properties from being an MLS listing and going over to a Kijiji rental listing, or vice versa in the other direction, with relative accuracy in terms of overall volume, depending on the number of changes and direction thereof.
I expect a large number of properties to be temporarily pulled off the market as people cannot sell them, nor rent them.
I usually don’t post on realtor blogs… (Comment Moderated)
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Mike Fotiou says: I usually don’t moderate comments either, but this isn’t squidly77. There’s no reason to troll or impersonate.