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Interpreting Sunshine Coast Real Estate Sales - The 3 Amigos
08-30-2013, 10:30 AM, (This post was last modified: 08-30-2013, 01:35 PM by Skook.)
#3
RE: Interpreting Sunshine Coast Real Estate Sales - The 3 Amigos
Carrying on from where I left off in the previous post…

I mentioned above that the July, 2013 benchmark price dropped to a level last seen in November, 2005; and, here is how I know this. After seeing how the June 21, 2012 changes to CMHC rules may have contributed to the drop SC benchmark prices over the last year, I decided to plot all historical SC benchmark prices as far back as possible which turned out to be 2003 - the first point where I had access to a full year of REBGV monthly stats. I then plotted all significant changes to CMHC rules over this period of time as well as adding other major economic events that may have impacted prices and sales. Here is the resulting chart…

[Image: attachment.php?aid=372]

The green line on the graphs shows last month’s benchmark price is matched by roughly three others in 2005 - the last being in November. The trendline spans the time period July, 2010 (highest benchmark price recorded for the Sunshine Coast) to July, 2013 - and records a drop from peak of 21.6% (-21.6%).

There is no doubt that CMHC rules changes have had a significant impact on the Sunshine Coast real estate boom and its collapse; however, those rules changes are far from the only factors. I hope to within the next month or so to finally post a thread I have been working on since early February that will take an in depth look at the years 1995-2007. It is a post that I hope will pull together much of the information I have posted here in the forum to date. This chart above is a significant addition to my research and was well worth the time spent preparing it.

Conclusions

I want to take a second look at the chart showing the SFD Benchmark Price from January, 2010 - July, 2013 along with one of the close-up views.

[Image: attachment.php?aid=370]

In addition to thinking about how those 2012 CMHC rule changes may have influenced the benchmark price over the last year, I recalled a post by Garth Turner on his blog (http://www.greaterfool.ca) that also had something to say about the movement of the market. That May 29th post was titled, “The Day it Died” and introduced us to Greater Toronto Area Realtor, Ross Kay. Turner quoted from an email he had received from Kay…

Quote:On May 19th, 2013 we recorded the lowest value of Canadian consumer engagement in real estate since 2010. What is scary here is that on April 8th 2012, we reached an all-time high engagement value. The May 19th numbers for 2013 represent about a 72% decline over that peak number. This massive decline raises grave concerns not being reported in newspapers across the country.

So we project 60 to 90 days from May 19th that MLS sales will be reported that will reveal the market died on May 19th. Our numbers have not been wrong since 2008. So as it turns out the peak of the real estate market in Canada was April 8th 2012, as posted here on Greater Fool. Peak pricing was established and as recorded MLS sales prices now show, anyone who bought in competition around that date paid too much.

Here is what Ross Kay wrote on his own website on May 29, 2013…

Quote:For the first time, since 2008, RossKay.com is going live publicly with its industry leading Real Estate Sales Trends Index because of the drastic downward trends it has recorded since April 8th, 2013. Over the course of the last 9 weeks, our index has revealed a downward spiraling real estate marketplace, with results that will not reveal themselves in MLS sales data for another 60 to 90 days, when they will finally be reported by Organized Real Estate Associations. (For Reference on March 6th, 2013, we projected a 7.7% decrease in sales volumes to be reported on national MLS sales numbers for May 1st. Since our index only projects trends the official drop of 6.2% recorded by MLS sales nationally, was indicative of the trend we stated. Our Index was the only index value in Canada to statistically project this trend.)

The radical drop in index value calculated for May 19 and again on May 26th shows a 37.22% drop and 39.11% drop over respective weekly values calculated in 2012. This drop has historical significance, as this represents the largest plus or minus percentage change, year over year, ever recorded by the index. To date 2013 respective weekly values have been lower than not only 2012 but also 2011 and have been increasing in decline week over week.

After reaching an all time Peak Index Value of 806 on April 1st 2012, the index was off 22.33% for the same Sunday in 2013 and the decline in index value has been steadily recorded.

What should the Consumer do?
First the trends our index reveals is just that a trend. We do not expect a decline of 37% to 40%, 60 to 90 days from today's date but we do expect when sales are finally reported massive drops in sales volume will be recorded.

For Sellers,
As we have been advising our own clients since April of 2012, Sell and Sell Now.

For Buyers,
As we have been advising our own clients since April 2011, wait.

My benchmark graph above appears to verify what Kay is saying about the years 2012-2013. Now, we all know that sales across Canada rose in July and many commentators have attributed those sales to buyers with low rate pre-approved mortgages jumping in before those pre-approvals expired at the end of July. So, August should be the litmus test for Kay’s predictions and, so far, August sales on the Sunshine Coast are bleak - only 20 single detached home sales in the combined areas of Gibsons, Roberts Creeks and Sechelt during the first three weeks of August (see pg. 2 of SC Listings & Sales 2011-2013). There are at least 710 SDH active listings on the SC. I can hardly wait to see the stats at end of the month.

As to the purpose of this thread which was to look at the three ways real estate sales are reported - Average Selling Price, Median Selling Price and Benchmark Selling Price (HPI), my conclusion is that the Benchmark Price and Home Price Index are doing what the other two have failed to do - show what is actually happening in the Sunshine Coast real estate market. In other words, the Home Price Index is living up to its Real Estate Boards’ billing as “the best and purest way of determining price trends in the housing market.”

Now, I will be the first to admit that I am no expert - I do not or ever have worked as a real estate agent or as a statistician and, in fact, stink at math. I have reached my conclusions based solely on the sales results I have seen on the SC and from the data and charts I have created for this thread and all are as accurate as I can possibly make them. Therefore, if others reach different conclusions when viewing this data, I would welcome your insight and comments.

Finally, there is one sentence that stood out for me in Realtor Mike Fotiou’s explanation of the Home Price Index that I quoted in the previous post and I believe it bears repeating:

“The index will help as price trends will reflect changes caused by individual’s willingness to pay for home attributes.”

I have underlined what I believe is the main message in that sentence. I think when you look at the Sunshine Coast real estate market as a whole we are now witnessing a major shift in buyer behaviour - what they want, what they are willing to pay for it and how they will pay for it. Perhaps at heart lies a major change in buyer profile. If these conclusions are true, then the long term impact to the SC will be profound; and, it is an impact that has already begun.


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