Australian House Price Index from ABS for September Quarter 2011

The acceleration in the declines has disappeared with the exception of Brisbane. The charts change shape from release to release, even for older quarters, due to revisions. Things look less precipitous than previously. But a 3-5% loss on top of inflation at 3.5% starts to add up to an slow-leak investment.

Sydney certainly appears to believe in a soft landing, but we only have two quarters of 0% growth from them so far. Sustaining it will be difficult, and not because property won't continue to be dear in Sydney, it will be because of access to credit.

Australian Change in Houe Prices September 2011

Vancouver October 2011 House Prices

The biggest news this month is that the peak price in Vancouver continues to be June 2011. The Real Estate Board of Greater Vancouver's HPI house price index for both overall and detached has continued to meander below the June 2011 price. Detached has fallen 1.78% or $16902 (yeah, my stats teacher from college would cringe at that kind of precision being reported, but he's not here.) The overall price has declined 1.26% or $7966.

Given the global economic climate and an ongoing vacuuming up of spare credit in China it is hard to imagine the trends will reverse, but Vancouver likes to surprise.

Vancouver House Price Change Chart Oct 2011

Vancouver House Prices Graph 2010 and 2011 compared

As to sales, 2011 continues to be dead on the five year average.

Vancouver Housing Sales Detached over Five Years

As to inventory, 2011 is running 2nd or 3rd for highest inventory. You can see in 2008 how the inventory shot to the moon as financing fell apart. Yeah, the value of a house isn't inherent, it's based on how deep in debt the buyer is allowed to get. Inventory shot up so fast, REBGV stopped reporting it in their press releases. The numbers charted below are computed based on 2009's numbers and the reported percent change from the previous year.

Vancouver MLS Inventory chart over five years

BC Real Estate Changes for August

This is a real tale of two provinces going on. Even BC Northern isn't beating inflation.

BC, Canada percent house price and volume changes (data from
www.bcrea.bc.ca)

Vancouver House Prices Peaked in June

Vancouver Detached house prices formed a new peak in June and are down 1.5% from there. Doesn't sound like much but that's $13,000.

REBGV

Sales are down and inventory is up, although not dangerously so.

Vancouver HPI Prices 2010 and 2011 for Detached and All Properties

Vancouver Residential House Price Change Year on Year Detached and All Properties

House Price Change Chart Canada Major Cities May 2011 Data

It's going to be a few weeks before we see June's matching price change data for Canada, so here is May.

Canada Vancouver Toronto Calgary Halifax Ottawa Montreal House Price change chart (smoothed over 4 months)

Click for a full-size view. Compared to the post before this, you can really see that Calgary is the Northern Hemisphere Perth, right down to the steeper decline/correction. The smoothed 6-city composite for May came in at 4.1% gain year on year, just a hair above the inflation rate for that month of 3.7%. Anything below the inflation rate is in decline in terms of a portfolio where real estate is the inflation hedge.

Now is probably also a good time to remind the good people of Calgary that a 50% gain is wiped out by a 33% decline. The downside is brutal.

Australian Change in House Prices 2nd Quarter 2011 - Charts!

Yay! Data. Nom nom.

Australia Large Capital Cities Price Index Chart June 2011

(If you are unfamiliar with indices, realize that the zeroing point (notice they all cross 100 at more or less January 2004) is an arbitrary point. The markets were not equal at that time. But the numbers are comparable relative to that point. 200 would indicate that each market doubled from there, but Sydney from a median of approximately 500k and Perth from a median of approximately 250k.)

The Index chart is a little boring, really. That's why I prefer the price index percent change chart.

Australia Large Capital Cities Price Index Year on Year Change Chart June 2011

Perth and Brisbane are moderating as they approach -3 to -4% change year on year. That doesn't sound like much, but relative to a median of $520k in April 2010, that's a $20k haircut in Perth. That's enough to shift perception on the wisdom of the short term hold. One would expect. Even the groggy speculators are going to be skipping the next round and peering through the smokey haze for the glowing green sign.

From the Accompanying PDF

The preliminary price index for established houses for the weighted average of the eight capital cities decreased 0.1% in the June quarter 2011. Through the year to the June quarter 2011, the index decreased 1.9%. This was the largest through the year decrease since the March quarter 2009 (–5.5%).

Lacking a global crisis, the decline in prices is much less severe. That does make the correction more manageable, from the banks' perspective, but it also makes it longer.

In contrast, the preliminary estimate for Sydney (+0.4%) was the first increase in the index since the June quarter 2010. Decreases in the subsequent quarters resulted in a through the year decrease of 0.7%. This was the first through the year decrease since the June quarter 2009 (–0.8%). Most of the positive contributions to the capital city quarterly increase were concentrated in clusters with median prices between $600 000 and $1 500 000.

Some other (fairly significant) revisions on the March data are described in the PDF.

Vancouver House Price Change Chart April 2011

Real Estate Board of Greater Vancouver Statistics Package has been released. Here is the latest house price change chart for April.

Vancouver House Price Changes, April 2011

It appears as if the previous trend line is trying to reassert itself. Last month, I suspected that it may do so now that we are fully clear of the mortgage change deadline and any late reporting from it.

The actual numbers off that projection were $620,000 for April up from $616,000 in March for all transactions and $877,000 for April up from $867,000 in March for detached transactions. That was just shy of the actual numbers of $623,000 for all and $879,000 for detached. April was always going to be higher than March because April was the highest month in 2010. Now, May, that will be a real test for the new trend line. In 2010 May was $8,000 lower than April for detached and $3000 lower for all transactions.

So, to go out on a limb, under the old trend line with April's data inserted, May would be $614,000 for all and $860,000 for detached, and continuing on that, hit zero gain year on year in August/September. Or, we could see another big discontinuity this year, like we had between May and June of last year and hit the speculative zero sum wall in two months. Such a matching drop would in fact erase the February/March surge from the chart and put us back on the earlier trend line.

Australia House Price Change Chart March 2011

Based on the XLS file available here.

Australia House Price Change Sydney, Melbourne, Brisbane, Adelaide, Perth March 2011

Only Perth seems to be putting the brakes on the plummet in price change. Not quite ready to stick a fork in this bubble, but as of this quarter, don't expect to get more for a house than you paid for it last year, unless you upgraded it (i.e., the speculative portion of this bubble is dead).

Hobart, Canberra and Darwin would also be piled onto that pack at ~0.5% year on year if I had plotted them.

Added: Because of revisions, prices for Sydney and Melbourne are changing even more radically than my silly little prediction.

Added 2: This is a good time to recall that price change is not symmetric--a 100% increase is wiped out by a 50% drop.

Vancouver Juiced for Second Month

The market moves upward for a second month in a row after half a year of declining change in prices.

One possible explanation for the juice (much supported by anecdote, and some preliminary weekly data) is the high motivation for obtaining a 35 year mortgage imposed by a March 18 deadline. A lot of sales continued to trickle through the stats in the week after, btw.

April 3rd's numbers from Will's Weekly numbers at VCI indicate a sharp drop in sales two weeks after the rule amortization rule change. (Scroll down for second spreadsheet.)

If we assume the rule change was responsible for the leap in the market, what will prices look like if the previous trend returns in April?

REBGV HPI Projected Out April-Dec Based on Previous Trend

April should be informative on the reasons for the leap in February and March.

April will also be interesting on another front: 18th is the date after which CMHC will no longer insure HELOCs. I, personally, believe this is more significant as it will most likely shrink access to home equity for the BC residents who are using equity to remain afloat (BC has been at a negative savings rate for years).

Australia House Price Trends - If History Repeats Itself

[Q4 2011 Version of this chart, click here]

The Australian Bureau of Statistics publishes the Eight Capital Cities House Price Index

Conveniently they provide on this spreadsheet columns titled "Established houses percentage change from a corresponding quarter of previous year". So I plotted those.

Australia Established House Price Index Difference, Year on Year 2003-2010

Perth and Brisbane are already at 0% price change, year on year. And Perth's rate of change is looking rather precipitous as it crosses the line.

Another interesting thing jumps out about this graph. Perth, from 2003 until 2008, was a market unto itself. But something happened at the end of 2008, it fell into lockstep with the rest of Australia's cities. To me, this implies that a market distortion came into play that was powerful enough to affect all markets at once, the same way.

Partly because I am bored today, I decided to take the shape of Sydney, Melbourne, and Perth's declines from 2008 and project them onto the ends of the current declines in price difference. The earlier declines in Perth and Sydney are a perfect fit to the current declines. Only Melbourne ended up with a discontinuity.

Australia Price Changes with 2008 Declines Repeating*

What does this mean? Nothing really. Markets aren't that predictable. It's just something to look at.

* in the case of Perth, I used the 2006/2007 decline

Vancouver January 2011 Price Chart Update

The change in house prices, year on year, declined on the linear trend line, as expected. [See earlier post Vancouver House Price Predictions from Jan 10]

Vancouver House Price Chart Change in Price Year on Year

It's now a six month trend, which is pretty solid. If this linear trend holds, the detached HCI price for February will be 813k and for March will be 804k.
The all dwelling HCI for February will be 588k and for March will be 585k.

Vancouver House Price Predictions for 2011

Lots of traffic comes into the this blog with the keyword "predictions". Since gambling with one's ego is the cheapest way to gamble, I'll plot some predictions out. Why not?

(BTW, you can always click on the graph to get a larger version.)

Vancouver House Price Change Year over Year Plotted Monthly with Predictions

This is the graph from Seriously Royal LePage? posted the other day. I added some trend lines, one linear and one a repeat of the previous decline in prices. I also made a hybrid of the two, in red. First off, I don't think that bottom that formed in 2009 will reappear this time around. Two factors were arresting the market's plunge at the beginning of 2009: Chinese bailout money spilling into Vancouver and Canada loosening lending standards which increased liquidity for traditional purchases.

The green (linear) line may hold firm until the market drops to 0% growth, year on year. Sentiment has a long way to swing, but after it does, recent history makes for a decent guess as to momentum.

So, my back of the envelope predictions for 2011 are:

March, detached house price (0% year on year): $800,000 (essentially flat from the last few months)
September, detached house price (-12% year on year): $699,000*
ADDED: December, detached house price (-15% year on year): $653,000

(* september 2010 was a slightly off beat month, I averaged August to October and took 88% of that.)

[The underlying chart has been updated for January]

Seriously Royal LePage?

Home prices expected to rise further: Royal LePage

Home prices will continue a "moderate and steady climb" this year, helped along by an improving economy and low interest rates, according to a report released Thursday.

Okay, Royal LePage (if that is your real name) I have a little chart for you. Below is the monthly % change in prices in Vancouver, Year over Year. Do you notice a trend? A really strong trend? Squint and I bet even you can see it.

Vancouver House Price Change Year over Year Dec 2005-Dec 2010

Also, you cite low interest rates as part of your reasoning for Canadian households to burden themselves with even more debt, even though mortgages are typically 5 year adjustable. On a 35 year mortgage, that's called a teaser rate, and it will have exactly the same consequences as teaser rate mortgages in the U.S. Oh, and by the way, Canadian banks are hoping for government-imposed change in mortgage terms back to 25 years, max, if not 10% down. How does that fit into your plans?

At some point the shilling becomes flat out irresponsible.

Visualizing Vancouver's Detached Housing Market -- Two Charts

It is difficult to assess the state of Vancouver's market because it has not been "normal" for at least a decade, if not almost two. Year to year comparisons using the last two years are almost random because of the record highs and mini crash of 2008.

I did up two charts to try to better see the state of things. The first is a circular graph. Note that December of one year connects to January of that same year, not the next year as it probably should. Just an artifact of the software.

Chart of Detached House Sales Vancouver 2006 - 2010

What does this tell us, if anything? The blue line, 2010, looks like the second worst year of the five, maybe the middle year, if we are generous. Except for the expanding finish it is putting on. The other thing I notice is that 2009 appears rotated around later in the year, as if the missing activity from early in the year got shifted to the end.  The blue line also looks to be trying to buck the usual year end slow down trend.

Detached House Sales Bar Chart 2006-2010 with average line

2008 was as much an outlier year as 2009 was in the other direction. 2010 starts out following the average line, but at the end we have a counter cyclic trend line, which if it holds up will make December an unusually active month for sales, comparable to 2009's numbers. I'm as big a bear as they come, but for those trying to get out of this market, there may still be time. (Especially with an 8 in the address.)

Vancouver Canada Housing Bubble Showing Peak

A Tale of Two Bubbles in Chart Form: USA and Canada

Canada and Vancouver House Price Bubble Chart September 2010

The Red and Bronze Lines are from Teranet House Price Index and the Grey Line is from S&P Case-Shiller House Price Indices

Prices are down month on month in Canada overall 1.07%, Vancouver 0.34%, Toronto 1.58%. October 2010's numbers will not be available until Christmas.

China's Liquidity and Vancouver's Housing Bubble in Chart Form

I took the MLSLink HPI data from the Greater Vancouver Housing Board and the Constant Quality Price Index chart from Evaluating Conditions in Major Chinese Housing Markets by Wu, Gyourko and Deng's working paper of 2010 and overlaid them.

Red line is Vancouver residential detached house prices in dollars (left hand labels) from MLSLink HPI, the grey (nominal) and black (real) lines are Wu, Gyourko and Deng's Constant Quality Price Index for Newly-Built Private Housing in 35 Major Chinese Cities (right hand labels).

From 2005 you can see Vancouver's prices responding like Ireland, the U.S., and the UK to the pressure of low interest rates. Up and up, but then comes the crash and down the prices begin to plummet. But a floor appears and then another surge upward, suspiciously forming a deflection point exactly where China's happened. That's the Chinese government's stimulus program.

Chart of China House Prices vs. Vancouver House prices 2005-2010

The same effect we see in Australia (Cascading Bubble Inputs, Australia) is present here (I'll redo that as a combined chart when I get a chance). Canadians credited the Winter Olympics for the double peak in house prices. I submit that it was, more so, China's insane excess liquidity.