Login / RegisterSlightly higher October housing sales in Vancouver signal a reversal from recent months
After several months of very low sales volumes, there's a ray of light for local real-estate agents.
The Real Estate Board of Greater Vancouver has reported an uptick in transactions in October over September. However, the monthly figures were still 16.7 percent below October 2011.
Since the federal government reduced the maximum amortization period on a home-mortgage loan to 25 years from 30 years earlier this year, the Vancouver real estate market has been on the skids.
In September, the sales volume of 1,516 units was 41.6 percent below the 10-year average. August sales were 39.2 percent below the decade-long average.
In October, however, the number of transactions increased to 1,931 units. That was just 28.5 percent below the 10-year average.
Agents make a living on the number of transactions—though the higher the price, the greater the commission.
And when it comes to price, the MLS Home Price Index benchmark clocked in at $603,800 for all housing types, which is down from the peak of $625,100 in May.
We are told about year on year monthly decreases of 39.2%, then 41.6%, and then 28.5%. These are ALL decreases, and VERY significant ones, especially when Vancouver alone has recently been building over 7,000 new units a year, and the Lower Mainland over 20,000.
Certainly one might argue with no statistically significant basis that the inflection of the sales volume curve over a single month (October) moved from concave to convex, assuming of course that no data correction is necessary. That is to say the first derivative, the change in slope of the curve, has perhaps changed signs.
But sales are still plummeting!
And why do we think that this has everything to do with the legislated change in the maximum amortization period?
After all, not four years ago in 2008 the maximum CMHC-insured amortization was reduced from 40 years to 35...and nothing happened. Then it went from 35 years to 30 years...also with no apparent effect. (CMHC meanwhile first STARTED requiring a 5% downpayment! What's with that?!)
But back to the here and now: The 30- to 25-year maximum amortization change is approximately equal to a 90 basis point (0.9%) increase in the interest rate in terms of the total monthly payment due, but of course the principle payback rate is faster. With the exception of the market crash of 2009, mortgage rates are 2-3 percentage points below what they were in 2008, and still headed down.
Interest rate declines have thus nicely kept pace with the amortization limit decreases, in terms of the impact on monthly payments.
So, this begs the real question, why are sales dropping NOW? Are we seeing banks turn down more applicants? If so, they'd be doing so while looking at nearly identical monthly payments for a given loan of $X, as comparing 2008 to 20012. The interest rate decrease has nearly precisely offset the decreased amortization period. (This should surprise no one, and it was not an accident.)
Of course, housing prices have gone up, and this may be the real rub.
Has real estate finally been priced out of the market?
Now THAT would be a novel perspective!
Have overseas buyers pulled back? Yes, there are ways to tell, but that takes some digging. Are condos and houses now being flipped, as always intended, at the "height" of the market? And are too many doing this at once.
Welcome to the reason the journalistic profession was created as has always been rewarded--albeit meagrely--by loyal readers.
You're reward of course is in heaven, if you ever get there. You have to earn it, and pedalling New Math or Newspeak is NOT the way.
This city isnt for everyone.
They can jack up our cost of housing, but they'll never take our freedom! (to rent$
You guys are swimming upstream.
Fuck the ditch, there's planes and ferries.
Joe Manhas