Saturday, April 14, 2007

Inventory Update and Charts





Plenty of new supply in the local real estate market this week. We appear to be trending to hit new highs in total inventory by June. This, by my estimation, will mean that we have over 6 months supply by the end of May and over 8 months supply by the end of October at the current sales rate and listing rate.

21 comments:

freako said...

Just to give some comparisons:

In July 2005, Phoenix had a little over 10,000 in inventory.

On by the end of Monday, Phoenix will have over 60,000 listings. That is a 600% increase in 21 months. It doesn't look to be slowing down anytime soon.

Phoenix has about 4 million people, roughly double that of the Chipman area.

Our current 11,000 would mean 22,000 in Phoenix. That line was crossed October 2005. The listings almost tripled over the next 18 months. At that rate, the Chipman area would have 30,000 listings by October 2008. Seasonality is out of sync. Now, should something similar occur here, it would probably happen faster because we have the precedent of bad news down south upping the urgency.

-\/- said...

Quite right Freako.

It seems to me we are heading straight into a period of increased inventory.

For those young kids who are considering buying these days: even if prices don't crash, imagine how much more choice you might have 6 months from now. It might make a difference between something average and something you really like....

Sorry to bang on about young buyers, but I am old enough to feel sorry for those poor kids who are going to lose their shirts in this.....

-\/- said...

Great work as usual, Mohican....
Keep it up!

Jesse said...

"Our current 11,000 would mean 22,000 in Phoenix."

I got shot down comparing Phoenix to Vancouver on rireb a few weeks back. The one difference I will concede without debate is that Phoenix has had larger % growth than Vancouver recently so higher inventory is justified to some degree.

I would be careful comparing extremes in the US market to here, though freako, I will buy you a beer if we hit 30K inventory within 2 years from now.

Paul said...

perhaps this winter slowdown we will not recover from...

blueskies said...

that linear chart line is very impressive!

freako said...

The one difference I will concede without debate is that Phoenix has had larger % growth than Vancouver recently so higher inventory is justified to some degree.

Wouldn't a fast growing place have LESS inventory? As a comparison from retailing, the high volume stores carry less inventory as a percentage of sales. Even if it was a factor it could not possibly justify triple the poulation adjusted inventory.

Second, growth or not, Phoenix now has over 12 months of inventory and growing fast. Twelve months during the proper selling season is unheard of. If Phoenix is growing, why aren't houses selling.

Third, if Phoenix is outgrowing Vancouver, why are prices less than half of Vancouver? Why did our appreciation match theirs on the way up?

I don't expect that beer, but you never know. If listings pick up by 50% (to and sales fall by 30% from current pace (roughly 60% sales/list), the ratio will hit about 25%, and we would add about 300 listings a day before expirations. Take off 100 or so for that reason, and we will add about a 4,000 a month (counting only business days). Divide by 2 to be conservative and to account for possible seasonal slowdown, and we add 2,000 a month. At that rate, we'd hit 3,000 by next February.

It does look like we will shoot through 11K and get half way or more towards 12K this month. Contine that pace for a few months, and 20K is not that far away.

But it is also possible that prices come down, which will pick up the sales pace and reduce inventory. That is the only thing that will prevent a huge inventory build up. Hardly a saving grace.

Jesse said...

"Wouldn't a fast growing place have LESS inventory?"

If population grows at say 3% per year that equates to 120K people per year or 48,000 housing supply increase is required per year @ 2.5/household. Builders (en masse) will forecast to fill this demand, though it looks like there will be more homes than families there for a while yet even if building stops cold (which it has not).

Compare the above stats to Vancouver where population grows 1.5% per year so about 12,000 additional units are required per year. Note from '01 to '06 there was a 10.8% increase in dwelling count but only a 6.5% increase in population (statscan data). Ummm...

patriotz said...

Builders (en masse) will forecast to fill this demand

Which demand? Actual demand for shelter (reflected in rents), or demand for purchases (sale prices)? Builders are driven by the latter, which is why housing stock is growing faster than population in Vancouver (as you have pointed out), and all the other bubble cities for that matter. All they care about is selling the housing stock - they don't care whether anyone actually lives in it.

Vancouver could experience net population outflows, but the builders would still be going gangbusters if people were still buying.

Jesse said...

"Actual demand for shelter (reflected in rents), or demand for purchases (sale prices)? Builders are driven by the latter, which is why housing stock is growing faster than population in Vancouver (as you have pointed out)"

The builder probably does not care much about the buyers' motives, though he might care that he will be in the red for many quarters due to oversupply.

The velocity of new dwelling creation should match the velocity of population change long-term. Recently one velocity has exceeded the other hence oversupply. Though if you look at the statscan page I linked above, all cities across Canada had the dwelling counts increase at a faster rate than the population. I don't quite understand it.

My original point was that 60,000 homes for sale will be eaten up faster in Phoenix than even two or three Vancouvers combined.

Jesse said...

"My original point was that 60,000 homes for sale will be eaten up faster in Phoenix than even two or three Vancouvers combined."

If all homes were to be occupied by usual residents of course!

freako said...

"My original point was that 60,000 homes for sale will be eaten up faster in Phoenix than even two or three Vancouvers combined. "

And that is exactly why I suggested that fast growing areas would have less inventory on a population adjusted basis.

You make a good case for why their is more construction in Phoenix. But new construction may spend very little time on MLS, especially in a growing market.

tulip-Mania2 said...

I think the reason why inventory is rising is that our" calling cards" are still at the printers.

The sooner the stupid Phucks from the Olynpic committee get their calling cards and start calling on the super rich jet set billionaires who don't know about Vancouver, the sooner the inventory will shrink.

And for once and for all, we bears will learn too late that we have run out of land.

patriotz said...

Though if you look at the statscan page I linked above, all cities across Canada had the dwelling counts increase at a faster rate than the population. I don't quite understand it.

I do.

Real house prices are well above historical norms. This results in a higher than normal supply (upward sloping). People are buying this housing not for yield (shelter), but for expected capital gains. Indeed yield is declining, which is exactly what one would expect when housing stock grows faster than households.

And what happens when the expectation of capital gains is lost?

tulip-Mania2 said...

"And what happens when the expectation of capital gains is lost?"

Bob Rennie's special marketing tactics will be in great demand.

Jesse said...

"Real house prices are well above historical norms. This results in a higher than normal supply (upward sloping)."

I understand that argument. But it is a trend across Canada. I could explain it by saying, yes everyone is overbuilding and it is because of an international credit bubble and speculative momentum. I would not want to jump to that conclusion without thinking about other explanations.

In Vancouver specifically it looks like the construction machine has continued at similar throttle compared to 15 years ago, even though nominal population growth has slowed. As you mentioned, builders don't really care who buys or why. But a lot of that building has to be either dark, vacation, or foreign.

Jesse said...

"And what happens when the expectation of capital gains is lost?"

The expectation of capital losses is gained.

Ulsterman said...

Enjoying the debate here, but i just want to correct the percentage calculation. An increase from 10,000 to 60,000 is a 500% increase, not 600%. Makes no difference to the argument, but just wanted to use one of the few bit of math i DO remember from high school :)

freako said...

"An increase from 10,000 to 60,000 is a 500% increase, not 600%."

Right you are. My bad. It is 6 times higher, but the increase is 500%.

jesse said...

"And that is exactly why I suggested that fast growing areas would have less inventory on a population adjusted basis."

In high pop growth areas inventory levels could be exacerbated in the extremes of the market. So in '05 everything built was presold hence low inventory. Now, with oversupply, forward-looking new housing builds up. Same as Vancouver only the variance could be different. Certainly Phoenix is a great case study for cause and effect but I am hesitant to directly compare quantitative numbers.

freako said...

"Certainly Phoenix is a great case study for cause and effect but I am hesitant to directly compare quantitative numbers. "

Phoenix is definitely unique in many ways. I flew right over it a few months ago, and many many new developments at the edges of town. Easy to spot. Green area surrounded by homes. How many golf courses do they need?

Phoenix is definitely a candidate for overbuilding due to the abundance of buildable land and the expectation of never ending flow of outside wealth who come for the sunshine.

I think we are grossly overbuilding as well. Time will tell.