Sunday, March 31, 2013

Lets hope it is a happy Easter for the everyone, and especially for the bears

At a MOI of nearly 7, we should see some price pressure. We should know in the next few days how March went for us.

Larry should have his averages out and I am hoping we won't see the shocker of last month, when a few very big sales skewed detached prices while attached and apartments drifted down.

I have completely lost faith in the various HPI brought out by the RE Boards, and I will looking to the median price for my next metric to watch.

If I had to guess...I would say a small drop in median price- say 1% or so and all 3 segments moving down in the averages.

Sunday, March 24, 2013

The lay of the land...

As we head into the last week of March, there are many diverse forces pulling our RE up and down. Here are some of them.

For the Bears:

1) We are at high levels of inventory

2) the MOI, even with the recent up-tick in sales is comfortably over 6.

3) Inter-Provincial Migration is negative

4) The CMHC is on the defensive, and is probably past the most reckless days. 

5) It looks like houses are now selling at Assessed. The bidding wars are a thing of the past (almost)

6) Prices are probably down 5-8% yoy. 'The top is in' - for now!

7) There has been a moratorium on Entrepreneur class and a cap on Investor classes entrants into Canada. These were announced some time ago but are likely now having more effect.

8) Crack down on tax-evasion. Which means the many loop-holes for tax-avoidance and local avoiders,  as well as the satellite families:

On the international front, the CRA will be able to make use of a new Stop International Tax Evasion Program, giving it major new powers of oversight and information collection. It will be enabled to pay individuals with knowledge of major international tax non-compliance a percentage of tax collected as a result of information provided. Certain financial intermediaries, including banks, will be required to report their client's international electronic funds transfers of CAD10,000 or more to the CRA. 

The CRA's process for obtaining information concerning unnamed persons from third parties, such as banks, will also be streamlined. In a more explicitly administrative vein, the Foreign Income Verification Statement will be revised to require reporting of more detailed information, and the reassessment period for taxpayers who have failed to report income from a specified foreign property on their annual income tax return, and failed to properly file their Statement, will be extended.

Of course one of the largest tax avoidance areas in BC is our Billion dollar drug industry. Not sure if that will be targeted or not.

9) The NDP are likely to win the next Provincial election and that may change the speculation psychology somewhat.

For the Bulls:

2) The banks are still trying their best to keep the party going, eg the super low 5 years rate at BMO, and Flaherty had to phone Manulife to tell them to withdraw the 2.89 % 5 year rate. Kudos to Flaherty (who has belatedly become a financial conservative). And to his critics - you know as soon as it hits the fan and starts to unravel the banks will be lining up at the tax-payers door, bleating and whining for bail-outs.

That's what they did in 2009 and that is what happened in the US.

Better to bring this party to an end, while it will still be a a huge bust and not BK of the Government.

3) Seen the winter they had out North? Sure we have had all rain and grey skies, but the trickle of Eastern Baby boomers coming here to escape the winters could increase as they hit their retirement years (also increases our healthcare costs)

4) As a Realtor told me recently.." when I pick up an investor from Shanghai at the air-port, they are here to buy. Not waste my time or theirs. Over the week-end they will find something". 

Just Shanghai BTW has the a population which is 70% of all Canada's. 

171 cities in China have a population over one Million people.

We have 5, with Edmonton near enough to make it 6.

5) rates are still VERY low historically and unlikely to move any time soon. Every day there is a new debt crisis somewhere. 

6) The Government can talk tough now, but what happens if the market starts to drop. can they withstand the pressure from the lobbyist and from home-owners? Of course there isn't much else we can do. We are now in a deficit position, rates are near zero, and the CMHC has already mortgaged the taxpayer to the hilt. But never rule out political foolishness.

So where does this all get us? Close enough to make it interesting. No crash and enough pulling and pushing to make every month's data worth pouring over for clues. So far I would have to say the bears have a slight advantage, lets see if it keeps up.

Tuesday, March 12, 2013

The ides of March

What do have to compare with? From the REBGV stats:

In March 2012, there were 2874 sales, 30% less than March 2011, and 8% less than March 2010.

March 2012 had the second LOWEST sales of any month since 2002. It was 17% below the 10 year average.

Listings were up 15% from March 2011.  

What does this all mean? It mean March 2012 was a very weak month and the bar is set very low.

If we go under March 2012's sales we really are in a correction.

Wednesday, March 6, 2013

Fraser Valley

Flat inventory. 28% less sales than last Feb. (2012)

SFH prices YOY:

Median down 3.6%
Average down 3.8% 
But benchmark comes to the rescue again - up 0.7%

Sales to active listings ratio = 10% ie MOI of 10.

The stats package is here

Monday, March 4, 2013

BMO does it again...

Goes sub 3% on the five .  Is this a prudent move for either the bank or the buyers. The buyers get better rates, but will they just buy more house than they can afford? Will it push them into the market just before a possible significant correction?

Will they gain on monthly savings but lose on the price?

What about the bank? We are looking at significantly lower activity in the housing across Canada, so are they just trying to price out competitors?

Well this is their first quarter report  .

TORONTO—Bank of Montreal said its first-quarter profit dipped 5% as revenue edged lower and provisions for loan losses rose....The bank said its total loan-loss provisions climbed to C$178 million from C$141 million.

What will this do, well it will bring in more business and allow them to book more profit, but how will it help reduce loan losses? It wont.

If you entice people to buy more house or to over-extend they are less likely to pay you back. Maybe BMO has such tight internal controls that they will tell their lending officers not to push the borrowers into more debt than they can afford. Go for to the same house, just  pay a lower rate for it. That would be the sensible thing to do. However if you think Banks are prudent and wise then maybe you should think again after reading this link. They look prudent when things are good.

What about Flaherty? Well he doesn't seem to pleased about this move : “My expectation is that banks will engage in prudent lending – not the type of ‘race to the bottom’ practices that led to a mortgage crisis in the United States,” Mr. Flaherty said in a statement to the Globe on Sunday, after Bank of Montreal reduced its price on five-year fixed-rate mortgages to 2.99 per cent from 3.09 per cent.

And nor should he, these too-big-too-fail behemoths know that with the CMHC and with the Finance Minister's ear, they will bailed out of any crisis which they helped make.

Lets leave the last word to a bank analyst

Analysts questioned whether lower rates are really a wise move by banks right now.
“How credit worthy is the marginal mortgage borrower in a market with a debt-to-income ratio at 163 per cent and an all-time high home ownership rate?” asked National Bank analyst Peter Routledge.

Friday, March 1, 2013

What is the average price for Feb?

Larry is out with his numbers , quick and reliable as ever.

The average SFH is back up to $1,221,037, within spitting distance of last Feb's high. Despite sales being 35% less than last Feb

No doubt our local media which is so good at doing in depth analysis will trumpet this rise (next to pictures of phantom mansions), but as Larry says 3 big sales skewed the results.

Working off Larry's numbers: 

Sales SFH = 707 for Feb 2013
Total Volume = 707 x 1,221,037 =  $863,273,159

3 sales at 11,000,000 + 14,000,000 + 18,000,000 = $43,000,000

Take 43,000,000 away from 863,273,159 = $820,273,159
Divide that by the number of sales 704 = $1,165,160

That would be less than Feb 2011's average. Quite incredible the effect of a few very large sales.
I don't know how the huge sales compare with last year or the year before, but with a 35% drop in
total sales, 15% more inventory and a SFH MOI of 9.25, this is anything but a strong market.

The Median will tell the tale.