Single Family Homes
The month-end average price was $464,655
- down 3.6% from last month
- up 6.4% from last July
- Trivia: without the sale of the $4.2M home, average price would have been $460,568
The month-end median price was $400,000
- down 4.5% from last month
- up 2.6% from last July
- Trivia: the $18,900 is the largest month-over-month drop using Metro-Calgary SFH stats which go back to 2002.
There were 915 sales in July
- down 13.8% from last month
- down 42% from last July
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SFH inventory dropped to 5525, down almost 8% from the end of June. Active listings are now below May’s month-end inventory levels.
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Condos
The month-end average price was $291,168
- down 0.4% from last month
- up 2.2% from last July
- Trivia: the $1.9M sale of an Eau Claire condo was the most expensive so far in 2010.
The month-end median price was $268,000
- down 0.7% from last month
- up 1.9% from last July
There were 396 sales in July
- down 11% from last month
- down 43.6% from last July
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Condo inventory continues to decline as listings expire or are withdrawn from the market. Inventory is back down to April’s month-end levels.
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CMHC and ‘Balanced Markets’
Sometime last week, CMHC released their Housing Now report. Below is an excerpt:
Balanced market conditions exist across Canada. An indicator of price pressure in the existing home market is the sales-to-new-listings ratio. New listings are a gauge of the supply of existing homes, while MLS® sales are a proxy for demand. For the fourth month in a row, the sales-tonew- listings ratio for Canada remained in balanced market territory in June, at about 48 per cent.
A sales-to-new-listings ratio (SLR) below 40 per cent has usually been accompanied by existing house price growth that is less than the general rate of inflation. This situation is known as a buyers’ market. A SLR ratio above 55 per cent has been associated with a sellers’ market, with home prices generally rising at a pace that is greater than infl ation. When the SLR is between these thresholds, the market is said to be balanced and home prices tend to increase at about the overall rate of inflation.
The problem with using SLR is that it doesn’t take into account how much inventory there already is on the market. The statement that “New listings are a gauge of the supply of existing homes,” is simply false.
For example, in July, there were 1942 new listings with 915 sales (Metro-Calgary SFH) = giving us a 47% SLR. Using CMHC’s calculations, the market was ‘balanced.’
915 sales with a month-end inventory of 5525 = 6 months of inventory waiting to be absorbed.
Was July a balanced market in Calgary?
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According to CMHC’s chart below, using their SLR formula, besides a brief period in 2009 there hasn’t been a buyer’s market in Canada since 1996.
Source: CMHC. Click to enlarge
I’ve always felt that “New Listings” was the most overrated of stats. Some people seem to swear by it, but I really could never find any use for it whatsoever. When I first started looking in real estate numbers average price, sales and new listings were the easiest to find, and I ran them through every analysis I could think of and could never find a worthwhile correlation for new listings with anything.
It’s really the inventory numbers that matter (at least in my mind), and it’s those levels and the changes in that which really seem to affect the market.
Maybe if factors like expired and relistings were isolated and reported, at that point my opinion of New Listings may change, but without knowing those components, it’s pretty useless on it’s own IMNSHO.
Kevin, I agree with you.
CMHC’s report also includes this caveat:
What the point of having the provincial breakdown was then, I have no idea. They are all shown with the same 40-55% balanced threshold even though that may or may not be applicable…
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In other news, fixed mortgage rates coming down again – this time led by RBC read more…
The sales to new listings ratio seems correlated with changes in price. In the summer of 2007 the ratio fell below 50% and the rapid price gains of the boom reversed.
When this ratio broke above 50% in March 2009 the market improved.
This year the ratio has dropped to 35% and now to 43% with the drop in new listings. This is being reflected in price.
http://4.bp.blogspot.com/_dDw9BOFM_C4/TFbFSmVJB8I/AAAAAAAAArM/g-mrvhL66WE/s1600/CalgarySalesListings2.jpg
The cutoff CMHC uses for buyers market at 40% for Calgary is too low.
With the wild swings in sales we’ve seen the last five years, you could ratio sales and virtually any number and it would appear to give that relationship.
I look at it a little differently than that even separate from sales. The rush of listings in the spring of 2007 started before the sales crash. After that inventory started to decrease on a year over year basis at the end of 2008 even though sales were terrible. And this year with listings deviating from their regular seasonal pattern we saw a spike in inventory.
I think that sales need to be compared to listings or similarly total inventory to get a complete picture of the market.
Seasonally adjusted, listings for July took a huge drop, over 20% off the June pace. I’ve adjusted all the numbers going back to 2002 and we’ve never had a listings drop that steep before from month to month. Even more impressive is the drop was accelerating into the end of the month which means August might be a lot lower.
When adjusted for seasonal changes, listings have actually declined since April. This year was front-loaded for listings and maybe sales also to a lesser extent. Sales were only 3% off their June pace but that’s still very slow considering June was terrible.
Prices dropped, even when adjusted for the usual June-July decline. This is not surprising considering the high inventory levels and ab rate.
Inventory took a drop, mainly from expiries and the big drop in listings and not from sales.
That said, the pace of sales was actually picking up a bit as the mean and median dropped in the second half of the month so we may see inventory fall even faster as price discovery continues. It looks like half the people with listed houses this year are delisting while the other half are finally dropping their prices.
At this pace I would expect price declines for a couple more months and a balanced market by the end of the year.
Bearclaw is right that big swings in Sales:New Listings tend to predict inflection points in prices 3-4 months later. I think we’ll need to see another month of gains in sales:new listings to know for sure if the market is turning around this time, from increased sales rather than dropping listings.
For what it’s worth, at this pace, sales would usually be 850, listings 1890, inventory 5500, median 399k, mean 466k if we were to follow usual seasonal trends to the end of August – right now I bet listings will be a lot lower as well as inventory and median and mean will probably be a bit lower too…
All this points to is not much is selling , I am thinking listings will moderate as the people that test the market realize they are not going to sell at a bloated price and delist. However people that need to sell are lowering their price and still that is not moving many sales.
Over the next few months we should see prices continue to drop the median should end up around 350,000 before we see a stabilized market in SFH. Condos is another story and that one is a little harder to figure out .
CREB has released July’s report – it has been SCRIBD in the main post above. (No changes were made to the post as official stats are the same as the preliminary stats released here on Sunday)
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The variable rate has risen a total of 50bps this year, and fixed rates are still getting lower. RBC cut rates yet again today (it did so last week too) with other banks following suit. More at Canadian Mortgage Trends
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Mr. Flaherty didn’t announce the mortgage rule changes until February 16, 2010 which were to come into effect on April 19th.
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With regards to the slowdown not being “surprising,” year-to-date, SFH sales are down 11% when they were forecasted to be up 17.7% in 2010. Condo sales are down 4.22% YTD, forecasted to be up 10.6%.
It has been repeatedly stated that the latter half of 2010 will improve. Will the forecasts turn out to be accurate since there are still 5 months remaining?
I won’t comment any further as I’m sure everyone’s quite adept at seeing through the tenuous assertions made in these types of reports.
Keep up the good work Mike.