Teranet House Price Index for June 2009

AUGUST 2009

A second consecutive monthly rise in June Canadian home prices in June were down 6.2% from a year earlier, according to the Teranet-National Bank National Composite House Price Index™. It was the seventh consecutive 12-month decline. The index is now down 6.8% from its peak of August 2008. However, it rose in both May and June after eight straight monthly declines. The June monthly rise was 1.5%. The turnaround is consistent with an improvement in market conditions in recent months for the country as a whole - more homes have been sold and fewer have been coming on the market. Teranet – National Bank National Composite House Price Index™ Contact Us For general enquiries: simon.cote@tres.bnc.ca For licenses covering all index-linked products, please contact: Simon Côté simon.cote@tres.bnc.ca 514 879-5379 Website www.housepriceindex.ca

Of the six constituent metropolitan-area indices, four showed monthly rises in June - Montreal (1.2%), Toronto (2.3%), Ottawa (2.1%) and Vancouver (1.6%). For Vancouver it was a first monthly rise after 11 consecutive declines. For Montreal it was a fourth straight monthly increase. In both Halifax and Calgary, June prices were down 0.2% from the month before. For Calgary it was the 12th consecutive monthly decline and the 19th in 22 months. Four of the six city indices were down from a year earlier - Vancouver (−10.7%), Calgary (−12.5%), Toronto (−5.6%) and Halifax (−0.4%). Montreal, up 2.4% from June 2008, is the only market that has yet to show a 12-month decline. Ottawa has shown a 12-month decline only once, in May of this year. The composite index is down 6.8% from the peak of August 2008. Toronto prices are now down 7.5% from their peak of the same month. Calgary is 15.4% below its peak of August 2007. Halifax and Ottawa show smaller declines from peak, 0.6% from November and 2.2% from October respectively. Teranet – National Bank House Price Index™ The historical data of the Teranet – National Bank House Price Index™ is available at www.housepriceindex.ca. Metropolitan area Index level June 2009 % change m/m % change y/y From peak Peak Date Calgary 148.31 -0.2 % -12.5 % -15.4% August 2007 Halifax 121.18 -0.2 % -0.4 % -0.6% November 2008 Montreal 124.02 1.2 % 2.4 % 0.0% June 2009 Ottawa 115.67 2.1 % 1.1 % -2.2% October 2008 Toronto 108.46 2.3 % -5.6 % -7.5% August 2008 Vancouver 134.59 1.6 % -10.7 % -10.7% June 2008 National Composite 121.89 1.5 % -6.2 % -6.8% August 2008 The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. 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 The Teranet–National Bank House Price Index™ is an independently developed representation of average home price changes in six metropolitan areas: Ottawa, Toronto, Calgary, Vancouver, Montreal and Halifax. The national composite index is the weighted average of the six metropolitan areas. The weights are based on aggregate value of dwellings as retrieved from the 2006 Statistics Canada Census. According to that census1, the aggregate value of occupied dwellings in the metropolitan areas covered by the indices was $1.168 trillion, or 53% of the Canadian aggregate value of $2.207 trillion. All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005. By: Marc Pinsonneault Senior Economist Economy & Strategy Team National Bank Financial Group Teranet - National Bank House Price Index™ thanks the author for their special collaboration on this report. 1 Value of Dwelling for the Owner-occupied Non-farm, Non-reserve Private Dwellings of Canada.

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Open Topic

I am going on vacation so here is an open topic for discussion.



I have a couple books I am looking forward to reading.


Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing
by Hersh Shefrin (Author)

Why Your World Is About to Get a Whole Lot Smaller
by Jeff Rubin (Author)

I am also looking forward to spending some time canoeing, hiking, and playing with my kids.

Chilliwack Real Estate Statistics

Here is the news release. Here are the numbers.

MLS® home sales activity in the area served by the Chilliwack and District Real Estate Board was up on a year-over-year basis for the third consecutive month in July 2009, posting the largest gain in four years.

According to statistics provided by the Board, MLS® home sales numbered 255 units in July 2009, jumping 42 per cent from the weak moth of July last year. This is the third year-over-year activity increase in as many months, and the largest since August 2005.

Sales were up on a month-over-month basis in the June-July period for the first time in six years. As a result, seasonally adjusted sales rose 14 per cent in July 2009 compared to June (seasonal adjustment removes normal seasonal variations). Seasonally adjusted activity has more than doubled since reaching an eight-year low last December.

“Consumers are becoming more confident,” said Jim Adam, President of the Chilliwack & District Real Estate Board “Recovering demand is drawing down the supply of homes for sale. This is firming up the market, and helping to stabilize prices.”

The combined dollar value of MLS® home sales in July 2009 totalled $77 million. This is also up 42 per cent from levels in July 2008.

Total MLS® sales numbered 274 units in July, an increase of 42 per cent from year-ago levels. The total value of all MLS® properties sold in July 2009 was up 48 per cent to $82.7 million.

The MLS® residential average price for homes sold in July 2009 was $302,133, virtually unchanged (up $210) from year-ago levels. Even so, this is the first increase in average price in more than a year.

The number of new residential listings on the Board’s MLS® system numbered 410 units in July 2009, down 19 per cent from July 2008. This is the seventh consecutive decline in new listings, all of which have been greater than 15 per cent.

Active listings continue to retreat from their elevated levels of 2008, posting a fifth year-over-year decline in as many months. There were 1,449 active residential listings on the Board’s MLS® system at the end of July 2009, falling 29 per cent from year-ago levels. This is the largest decrease in more than nine years.

The number of months of inventory stood at 5.7 months in July 2009, which remains down significantly from the recessionary peak of 24.2 months last December. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

The Chilliwack and District Real Estate Board is an association of 283 REALTORS® that provides services to and sets standards for members. The Chilliwack and District Real Estate Board serves Chilliwack, Agassiz, Hope, Boston Bar and Harrison.

The Smell Test

Think about house prices in Vancouver for long enough and the price tags we discuss in our fair city don't seem to shock us after a while. Go away for a bit and return and you find that our real estate market is like a bad smell that you didn't notice when you were in the room but when you come back it seems intolerable.

Thinking about houses in Vancouver, where average household incomes are in the $60,000 / year range, I like to imagine who might live in that $1,000,000 house, recognizing that with a 10% down payment it still takes a $175,000 / year income to qualify for the mortgage. It might be a 'rich' foreigner or a successful lawyer or doctor or business owner. When I see pictures from listings like this one, I think that I may not be so delusional after all to think that most of the people who buy homes in Vancouver may not be able to actually afford them. Shocking, I know.

Keep in mind that this house with a near $1,000,000 price tag neighbours a commercial building and is metres away from the insanely busy Oak Street. Not exactly where I picture a successful lawyer, doctor or business owner living. The other pictures shed some light on who may live there and what kind of lifestyle they can afford. I've got nothing against having some old furniture in the den but this stuff is hideous and hardly what I think of when I think of a $1,000,000 house. Yuck.

Anyway, things just seem to be a little smellier than normal lately.

Vancouver - July 2009 Housing Starts

The Canada Mortgage and Housing Corporation released housing starts yesterday for the month of July and it was in the news across the nation. Vancouver saw a measly 516 housing starts during the month of July.

This does not bode well for construction employment. Many of the nearly 20,000 units under construction currently will complete in the next 6 months and I expect the number of unemployed construction workers will skyrocket as there are very few projects to pick up the excess labour.

Chart Extravaganza!!

Case Shiller and Teranet both released data for May 2009 last week and I have compiled / updated some charts to display this data.

The first chart shows the monthly percent price change in selected cities. What I would note here is the clear seasonal effect on price movement. Prices are more likely to increase in the spring and summer and more likely to decline in the fall and winter.



I recalculated the Teranet and Case Shiller Indices to show the same base date in 2000 so we can view the results of the boom and bust in the US and Canada in a comparable way. It is amazing to me how high prices got and how far they have fallen in some places - almost back to pre-boom levels.



The last chart is the now well known price decline from peak chart. I added Calgary upon request from some regular readers from Calgary. The smoothing (3 month moving average) that takes place in the Case Shiller and Teranet data really makes a big difference in how peaks and price changes are displayed.

Greater Vancouver Real Estate - July 2009

The Real Estate Board of Greater Vancouver released the statistics package for the month ending July 31st this week and the statistics revealed several interesting facts.

Here is a synopsis:

Sales were really high. In fact it was a record July for sales in the REBGV area. It seems that the local 'belief' in owning real estate as a recipe for financial success and security is undying.

Active listings are dramatically lower than the same time last year.

Consequently, months of inventory is really low at 3 months. This means that there is really tight competition for properties.

Prices have been edging higher since March in a very strong seasonal run spurred on by lifetime low interest rates.

The correlation between months of inventory and prices changes is still relatively strong.

It will be interesting to see what happens in the local market over the next 6-8 months as the super-low rates are now unavailable and the normal seasonal weakness should kick in.

FVREB July 2009 Statistics

The Fraser Valley Real Estate Board has released the monthly statistics package for July 2009. Here is the scoop.

Sales were really, really strong in July. In fact it was the fifth highest monthly sales ever recorded in the FVREB. According the the FVREB, '37% of buyers were first time buyers' which, as they mention, creates a powerful 'ripple effect' of move up buyers. Sales beget more sales.


Active listings still rose modestly through the month of July.

Months of inventory fell slightly to 4.55 which puts the market in 'sellers' territory.

Prices have certainly come up from the lows witnessed in the late winter / early spring but are still below peak levels.

Not surprisingly, higher sales combined with stable inventory has created a market in which prices are rising. Time will tell how long it will last.

My hunch is that we have seen the last boom month this year in terms of sales and it will be downhill from here as the mortgage preapprovals at the 'ultra-low' rates of the late winter / early spring are expiring now. Don't read this to mean that I think prices are going to fall precipitously from here on out but I do think there will be significant weakness in the later part of this year.