Well, a short update on the Greater Vancouver Real Estate inventory and it appears that the sales rate this May is much lower than last year so we are not seeing the drawdown on inventory that we witnessed last year. This sets the stage for a higher Months of Inventory number later this year, and, as I have argued, it will take over 6 months of inventory to see any real negative price pressure on our local housing prices.
Real estate market statistics will be out this week and it will be interesting to see what the trend is - I predict more inventory, lower sales, and higher prices for the time being.
In a slightly related topic, I saw a great piece of analysis over at Seattle Bubble Blog. It talks about various US housing markets and the number of months from the peak of year over year appreciation to negative year over year appreciation. The average among US markets is 19.6 months from peak appreciation rate to negative. Locally, appreciation in Greater Vancouver peaked May 2006 at 21.8% YOY. Appreciation peaked June 2006 in the Fraser Valley at 23.6% YOY. If we are average, this means we should hit negative YOY appreciation by December 2007 or January 2008.
8 comments:
What effect do you think the latest 0.3% jump in fixed rate mortgages will have on inventory levels? (eg. ING is now 5.69% for a five year fixed, vs 5.24% previously)
Any chance of an updated renewal gap chart sometime this month?
"Any chance of an updated renewal gap chart sometime this month? "
The renewal gap is interesting, but I don't think it has much bearing on price levels. But 0.3% just has to put a lid on price levels in this uber unaffordable environment. I have pretty well given up hope, but just maybe we will have a surprise to the downside in May. Though the impact probably won't be seen until June stats.
"What effect do you think the latest 0.3% jump in fixed rate mortgages will have on inventory levels? (eg. ING is now 5.69% for a five year fixed, vs 5.24% previously)"
Not too long ago they were at 5.09% for a five year fixed. When interest rates are low, the impact of these "small" increases are under estimated. The difference between a 300k mortgage @ 5.69% (25 year amortization) versus 5.09% is over $100 per month. Not enough to break the bank, but still noticeable.
If the rate rises from 5% to 7%, many people think it's no big deal, it's only 2%. However, the amount of interest charged on a mortgage @ 7% is 40% higher than a mortgage @ 5%.
OT, took another peak at what is up at Chipman's. Mostly same old. Here is a recent one:
"The only counter is that if you adopted the position 4 years ago there has to be a huge correction for you to get back to where you started, and you’ve thrown out thousands of dollars in rent and missed a lot of appreciation in the meantime. "
Agree about the lost appreciation (as it stands today). But why oh why does the false and cliched "trown out money on rent" have to crop up again and again. I can see trolls dropping that line a few times, but Rob and Aaron have been called on this falsehood umpteen times.
Since ownership costs are higher than renting, it is the renter who is saving money vis a vis the owner (appreciation expempted).
mohican:
Thanks for keeping us updated with the stats.
And that Seattle tidbit is tantalizing.
freako:
Noise-to-signal-ratio at rc's has passed 20:1.
And the old cliches, reworded in seemingly infinite variety, drive any sane analyst completely bonkers.
I still pop in for the stats, though, and occasionally see an entertaining comment in a familiar hand.
I still pop in for the stats, though, and occasionally see an entertaining comment in a familiar hand
The dailies are tough to watch, like paint dry. If mohican keeps posting weekly updates of the inventory, I see little reason to visit Chipman's blog anymore.
If I want to see bulls argue with freako and others, I check out the RE Talks forum.
Pre-approvals are good for 90 days so I would not be surprised to see a final small foray from buyers wanting to buy a property financed at the lower rate. Rates on a slowly moving upwards trajectory will not kill the market right away, but tightening lending standards will.
"Noise-to-signal-ratio at rc's has passed 20:1."
Totally agree, its terribly irritating and unbearable to read through all of the nonsensical comments. I just stick to reading Rob's post with the stats and skip all of the useless banter.
I'll try to stick to the 'personal sanity' side of things here.
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