VIREB - 2013 Sales Data (Vancouver Island REB)

[Skook]

November 10, 2013 Update:

This post will conclude the VIREB October, 2013 sales data.

I’ve been willing this post to write itself over the last few days, but it refuses. The reason: I now have the VIREB’s new MLS Home Price Index data to contend with and I feel I should attempt to explain the results along with the rest of the October data when all I would like to do is just stick up all the tables and charts and leave it for you to figure out; but, let’s see what I can do with this however briefly.

So this month, the VIREB makes available to the public a 10-page package of stats all based on the MLS Home Price Index method of sales reporting. You can download it from the VIREB website (top of right hand column). However, it is still preparing its previous method of reporting sales and sending it out to board members and obtained it from my usual source - I hope that source will continue to post it. So, I have prepared this post using both the old and new sales info.

I’ll begin by presenting the first four paragraphs from the November 1st VIREB press release regarding October’s sales (found in the new stats package). Note that the bold highlighting is my own.

Quote:FOR IMMEDIATE RELEASE
November 1, 2013

Healthy Home Sales Show Return to Historical Averages

NANAIMO, BC – Sales activity across the Vancouver Island housing market area continued to improve in the month of October, resulting in a 29 per cent increase in unit sales over this time last year. As sales momentum continues to build after a particularly slow market last year, we are witnessing a return to our historical averages across the board area.

The Vancouver Island Real Estate Board (VIREB) reports that there were a total of 352 single-family homes sold in the VIREB area on the Multiple Listing Service® (MLS®) in October 2013. This signifies a 29 per cent increase compared to the 272 sales recorded in October 2012, and a 4.8 per cent increase over last month.

“We are currently seeing a good supply of listings and attractive interest rates, which we anticipate will remain for the foreseeable future,” said VIREB president, Gary Gray. “This should create a healthy market balance moving into the new year.”

Now, here are October’s sales using the previous method of reporting. As you can see in the top table below not only was there a substantial increase in SFH sales (+29%) over October, 2012 but all types had significant increases with total sales up a whopping +39%. On a year-to-date basis, we can see that 2013 is up +9% over 2012; however, total sales this year are still -3.1% below the year-to-date- total reached in 2010 (4994). That being said single family home sales appear to have reached a new high (3451) for year-to-date sales.

What accounts for these October’s sales? I am no expert but here are my thoughts and if anyone can add to this, please do. If you look at the second table below, you will notice that overall the total Active Listings for all types has been dropping on a month-to-month basis compared to 2012. So, potential buyers are chasing fewer properties. Another possible reason is price and to best explain that, I think we need to look at the new MLS HPI data which will follow my Active Listings charts.

Next, are the usual charts I post; however, I have added two new charts pulled from this month’s VIREB stats package.

Now, let’s look at the new VIREB MLS HPI data. First, I am going to present the balance of the November 1st VIREB press release which announces this change and presents some HPI and Benchmark price data. As well, I will quote VIREB’s reasons for adopting MLS Home Price Index reporting.

Quote:This month, VIREB joins the Canadian Real Estate Association and ten major real estate markets in Canada by adopting a new method of statistical reporting called the MLS® Home Price Index, or HPI. This system provides a more consistent trend analysis, and is a better indicator of property value that averages and medians, which are easily skewed by the sale of high-end or low-end properties. The methodology used by MLS® HPI has been endorsed by Statistics Canada, Canada Mortgage and Housing Corporation, the Bank of Canada, Finance Canada and Central 1 Credit Union.

Mirrored after the Consumer Price Index, the HPI calculates the value for a typical “benchmark home”, which is a notional dwelling that shares a specific set of qualitative and quantitative attributes that are typical for the type of residential dwelling in question.

For October 2013, the benchmark price for a single-family benchmark home in the VIREB coverage area was $310,100, with an MLS® HPI index value of 145.5. (This represents a 45.5 per cent increase since January 2005, when the index was 100). This benchmark price increased 0.50 per cent over last month and decreased 1.4 per cent over last year. The average price of a single-family home in the VIREB area was $330,304.

Benchmark prices tend to be slightly lower than corresponding medians and averages. MLS® HPI estimates the values of our typical homes, whereas medians and averages reflect the overall selling prices of the unique mix of homes that sold in a given month.

The benchmark price for a single-family home in the Campbell River area was $260,000, up 1.1 per cent over last year; in the Comox Valley the benchmark price was $312,300, down 0.8 per cent over last year; Duncan reports a benchmark price of $281,600, dropping 4.3 per cent from last year; Nanaimo’s benchmark price was $325,600, down 1.3 per cent over last year; Parksville/Qualicum has a benchmark price of $347,300, dipping 0.4 per cent from last year; and Port Alberni is listed at $193,600 for a benchmark home, up 6.1 per cent over last year.

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Why an MLS® Home Price Index?

The MLS® HPI captures and analyzes Canadian home prices based on both quantitative and qualitative housing features.

Quantitative features captured by the index are, for example, number of rooms and bathrooms, living area above ground and the age of the home. Qualitative features include finished basement, if the home is new or resale, and the home’s proximity to shopping, schools, transportation, hospitals and so on.

The MLS® HPI gauges Vancouver Island prices relative to January 2005, and tracks price trends for benchmark housing types:

• Single family homes: 1 storey & 2 storey
  
• Townhouses
  
• Condominium apartments
  

The complete methodology is available at http://homepriceindex.ca/hpi_resources_en.html

Why does it matter?

Average and median home prices are often misinterpreted, are affected by change in the mix of homes sold, and can swing dramatically from month to month (based on the types and prices of properties that sold in a given month). The MLS® HPI overcomes these shortcomings.

Compared to all other Canadian home price measures, the MLS® HPI identifies turning points sooner, is the most current, and is the most detailed and accurate gauge for Canadian home prices.

How to Read the Tables

Benchmark Price: Estimated sale price of a benchmark property. Benchmarks represent a typical property in each market
Price Index: Index numbers estimate the percentage change in price on typical and constant quality properties over time. All figures are based on past sales. In January 2005, all indices are set to 100.

Month/Year change %: Percentage change of index over a period of (x) month(s) year(s).

I have created the table below for Single Family Home (SFH) sales using the new MLS HPI data showing the HPI and Benchmark for the current reporting month (Oct 2013), last month, one year ago, 3 years ago (36 months ago), and five years ago (60 months ago).

With the Benchmark Price data, I have calculated the % change relative to October 2013; so, the 3Y%Chg is comparing Oct2010 vs Oct2013 and the same holds for the 5Y%Chg.

I want to point out that my calculations for the 1Y%Chg differ from those calculated by the VIREB presented in its October Press Release above (highlighted in blue). I triple checked my data and calculations and cannot explain the difference.

Now, according to the Boards that have adopted the MLS HPI reporting method, it is the purest method for showing sales “trending”. If so, then what we see with the Benchmark Price for the “typical” home in each reporting area is that despite an slight upswing in a few areas (Campbell River, Port Alberni/West), the Benchmark continues to drop. In other words, the “typical” home continues to drop in value.

Therefore, sales in October could be influenced by the dropping inventory (mentioned above) and by the continuing drop in home prices. Perhaps, buyers feel prices have reached their lowest level and want to get in before they start to rise again. As well, they may be taking advantage of a last month of pre-approved lower mortgage rates or fear rising interest rates in the near future despite current medial reports. Again, these are only my thoughts and if anyone would like to correct or add to this, please feel free to post.

Finally, I have included three charts from the VIREB package comparing the Average, Median and Benchmark HPI for Single Family, Condo (Apt) and Townhouse. You will notice in all cases that the HPI is showing almost a flat line and because of this there are some who believe that HPI fails to truly reflect what is happening in the real estate market. One individual who feels this way is Garth Turner (former conservative MP and now a financial advisor). Turner has a blog and you can read his views on the MLS HPI in his November 3, 2013 post, ‘Scrubbed’.