Slightly 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.

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Lewis

Nov 2, 2012 at 11:50am

Blips here and there are normal....the world still wants to come to this part of the world.

5 6Rating: -1

Rand Chatterjee

Nov 2, 2012 at 3:06pm

When is a 16.7% decrease an increase? Is this the New Math, or maybe Newspeak? And from the Georgia "Straight", let alone from the Great Charlie himself!

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.

13 3Rating: +10

of_no_consequence

Nov 3, 2012 at 8:39am

Lewis let's hope the world wants to come because locals certainly can't afford it here.

7 14Rating: -7

Sceptic Bear

Nov 3, 2012 at 9:03am

Let's not forget that how quick the real estate board was to alert us last month to September having two less days this year than last...Notice how no one is bringing attention to October having two more days this year! So tired of seeing fudged statistics taken as fact

5 7Rating: -2

rvg

Nov 3, 2012 at 12:44pm

Rand, don't try confusing the issue using logic and common sense to make your point. Sales are UP!!!! BUY NOW!!!

7 7Rating: 0

prenup

Nov 3, 2012 at 1:09pm

Im local and i live/own here? Im really tired of people bitching about how expensive it is in Vancouver. Not every city is meant for every income class to own a house. Look at Zurich.. condos START at 1 million Euro. Seriously....just like homeless people bitch that they deserve free housing, income earners bitch a the cost about why they cant afford a house.

This city isnt for everyone.

2 9Rating: -7

William Wallace

Nov 3, 2012 at 2:41pm

Way to add a thoughtful analysis, Lewis - the world wanted Nortel stocks, not long ago - do you think real cities sit around and talk about world class this and world class that? They don't. Theyre too busy trying to contain, employ, house and feed their excess segment of the world. Let's cherish what we (had) and tell the world to fuck right off.

They can jack up our cost of housing, but they'll never take our freedom! (to rent$

7 11Rating: -4

grasping at straws

Nov 3, 2012 at 11:19pm

never thought I'd see Charlie Smith finding the clear sky underneath layers of clouds. Say it ain't so Charlie! Shilling for the industry.....Dem good olddays commin back agin....

8 11Rating: -3

Lawrence

Nov 4, 2012 at 5:38am

I can afford to buy in Vancouver but I choose not to. Too crowded, too much traffic, overpriced in everything from food to housing. There is much better value elsewhere with more opportunity. Some people in Vancouver are thinking that they are something special...really not that special, they are special in their own mind.

4 11Rating: -7

Save Vancouver

Nov 4, 2012 at 10:01am

The Straight should be pushing for a slowdwn, the longer these overpriced shoeboxes take to sell, the more ads their desperate peddlars will have to buy!

8 12Rating: -4
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