GREATER MONCTON REAL ESTATE BOARD
RESIDENTIAL HOUSING MARKET – DECEMBER 2012
Residential Sales
Sales for the month of December totalled 93, down considerably from November (Christmas trough) and down about 26% from the same month last year. In fact sales year-to-date (YTD) are down 8.3% from last year. The peak year 2007 had December sales at 126; the YTD sales are now at levels about 20% less than this 2007 peak year.
New Residential Listings
Despite the slump in sales the number of new listings arriving on the market continue at quite high levels; there were 4855 new listings YTD up about 7% from the same period last year. The number of listings remaining unsold at the end of this month was 1829 -- based on the current sales volume this means that there is over 19 months’ inventory on the market. We know from experience that a more balanced market is achieved when the months’ inventory is around 7. Although the month of December will yield high inventories due to the Christmas season this year’s inventory is especially high, indicating a continuation of the unbalanced “buyers market”.
Average Selling Price of Houses (AHP)
Average selling price is simply the total sales dollar volume divided by the no. of sales for the month; this stat must be used cautiously since it may relate more to the no. of homes sold in the high price range than to the change in the value of any given home. Nevertheless the trend over longer periods of time can be an effective indicator of market conditions. The average house price increased from about $129,000 YTD December 2006 to about $158,000 YTD 2012 an increase of about 3.7% per annum. If the period since late 2008 (after the financial crisis took hold) is examined the increase is only 1.7% per annum. Nonetheless, this is quite remarkable during a period of declining sales and is probably a reflection of two things: firstly, sellers of used homes have been taking their homes off the market rather than accepting lower more realistic offers. Secondly, it might also be influenced by the fact that homes valued at $250,000 or higher comprised only 6 to 8% of the market in 2006 whereas today that has risen to about 10 to 14%. When this factor is removed it says that house prices have probably held stable or perhaps even declined, particularly in the period since 2008.
Overall Assessment and Projection
Many of the concerns expressed in the November report remain today, fragile global conditions and the uncertainty surrounding the U.S. economy; the immediate “January financial cliff” has been averted but there are a number of similar hurdles to be overcome in the upcoming year. Despite concerns about increasing levels of consumer debt the Bank of Canada has chosen not to increase interest rates at a time when the economy remains weak. As long as our growth and inflation rates remain relatively low then interest rates are not likely to be increased.
Notwithstanding the above, all real estate markets are local: the present poor sales performance that continues to plague us has resulted in new listings outpacing the sales by 2 to 1 and the resulting surpluses will exacerbate the existing unbalanced buyers market into the new year. Reasons are many and varied including some shift in housing preference to apartment living and newer construction, high property taxes (particularly on non-owner occupied), population egress, and general economic uncertainty. It is expected that markets will remain tight in the short term and for much of 2013.
Data: CREA Activity Reports (residential stats only)