Home > interest rates, real-estate > Detailed Analysis of GTA Housing Market – up to August 2010

Detailed Analysis of GTA Housing Market – up to August 2010

I have been posting housing stats for a couple months now but I never thought about seasonality… housing moves in cycles – like a lot of other markets – due to two major factors: weather and school.

The seasonal trend is very clear from this sales chart – sales increase from January to May, then slowly decrease from June to August, pick-up marginally in September and then decline gradually with a sharp drop-off in December

The next logical question is how does seasonality affect prices?

To look at the seasonal trend, I have charted the month-over-month change in resale home prices since 2005.

Even though most market pundits and MSM claim 2009 to be an anomaly, I think the 2009 monthly price trend sticks well to the seasonality.

Here is a line chart with the same data as above (take your pick ;)

(Note: Legend is same in all charts)

This table summarizes the above chart and shows the direction of price movement in a given month:

Period Price Direction
November-January, Jun-Aug Decreasing
Feb-May, Sep-Oct Increasing

So how does this fit into the current numbers ?

Well, GTA prices declined about 8% from Jun-Aug… believe it or not GTA prices declined between 5-8% from 2006-2008, only in 2009 they declined by 2%… so the current trend should not be alarming. Similarly, the decline in Sales is almost in line with previous sales decline of 25-30%.

Is this good news?

To answer this, lets look at the year-over-year changes

Again, line chart with the same data as above year-over-year column chart

(Note: Legend is same in all charts)

The yearly downtrend is against the seasonal uptrend… so the next couple months/quarters should be key.

Low mortgage rates might again drive demand!

Even though prime rate has risen by 75bp or 0.75%, variable mortgage rates have not increased proportionally due to heavier discounting by mortgage brokers/banks.

Before Bank of Canada increased rates, the lowest Variable Rate was around 1.75%. Today, even after a 0.75% increase in rates, the variable mortgage rate is 2.10% – a mere 0.35% increase… so rates haven’t increased as dramatically as the media makes it sound!

Fixed Rates have been dropping in absolute in term due to the recent rally in bond markets… today you can get a 5-year fixed rate mortgage for 3.59%… which is very close to the lowest mortgage rates in 2009!

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