Saturday, April 07, 2007

REBGV March Statistics and Inventory Update

Greater Vancouver home prices rose again in March to put Vancouver in the top 5 most unaffordable cities in North America (sarc) hooray - I'm so excited (/sarc) !

This price rise was accompanied by a decrease in demand / sales and a rise in supply / listings. Economics 101 taught me that when demand declines and supply increases then a shift in prices is shortly forthcoming, but we will see (sarc), maybe Vancouver is truly different and defies the fundamental economic principles of equilibrium, supply and demand (/sarc)!

Price compression - the observed phenomenon that 1) prices of apartments tend to rise faster than the prices of single family homes during booms and 2) prices in outlying regions (ie. maple ridge, port coquitlam, langley, etc) rise faster than prices in the city. My compression hypothesis is that as we near the end of the boom cycle the compression will reverse into decompression with apartments and outlying areas losing first and the most value as a percentage.

Witness the compression between housing types here:

My intention, at some point, is to get some more data to do a more thorough analysis over a longer period of time. If anyone has access to longer time frames of data that is not available in the public realm, please email me, I'd love to get my hands on it.

On the inventory front:



Have a great weekend.

5 comments:

Warren said...

Well, the stage is certainly set for some overall drops and "price decompression". Question: Where is the border between REBGV and FVREB?

It appears that downtown condos will drop first, but I've been surprised before.

mohican said...

REBGV covers Burnaby, South Delta - Ladner/Tsawassen, Coquitlam, New West, Port Moody, Port Coquitlam, Maple Ridge, Richmond, Pitt Meadows, Squamish, Sunshine Coast, North/West Vancouver, and Vancouver.

FVREB covers Surrey, North Delta, Langley, Abbotsford, White Rock, and Mission.

domus aurea said...

Mohican,

thanks for the data. I enjoy your posts.
One question: how do you compute the price compression index? Surely there is some normalization goign on, because a ratio less than one in nominal, raw prices would not make much sense. What is the normalization factor? How do you rescale?

Also: any evidence of the unwinding of price compression in the US previously hot markets? That would be great to see.....

mohican said...

domus:

Good question on methadology - essentially I have home price index data for both the SFH data set and the APT data set. I do not have historical nominal price data for both so I cannot compute a "true" price compression graph.

This is why I have a plea for data in my post! I still feel that the house price index is a good guage of the compression phenomenon though. Having the nominal price data would be better.

domus aurea said...

Thanks Mohican.

I also have a formatting comment: it might be easier to read the graph if you reported the dates only at longer intervals, but in larger size. After all one can interpolate time.