Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to January 2012. (The blue dots on the left of the graphs represent January 2012.)
And the detached benchmark price:
Commentary: January 2012 saw rather weak sales volumes. Months of inventory (MOI, the number of months it would take to clear month-end inventory at current monthly sales levels), a key indicator of market liquidity and impending price strength, is at about 8, a level concomitant with falling prices.
Total inventory went on a tear, recording the largest monthly gain in recent memory, most listings predated Chinese New Year, one assumes many listings were advanced to hit the real estate press in time for the two-week-long holiday, now nearly complete.
Below is the predictor of price gains, based on half-over-half price change to months of inventory correlation, and below that the scatter plot showing the raw actual data:
What this shows is the change in prices in a month from 6 months ago based on actual data and “predicting” the price based on months of inventory from that month based on linear regression of half-over-half price change to months of inventory (with 3 month moving average).
January 2012 was weaker than most past years (2009 being the glaring exception) in terms of sales and growing inventory. Due to several factors -- higher prices, relatively subdued population growth, tightened credit conditions, and a predicted increase in dwelling completions -- I expect the next several months of 2012 to see lower sales volumes and higher listings than 2011. I do think benchmark prices will increase from current levels through the first half of 2012 but prices are a lagging indicator of market distress. If inventory continues to increase and sales remain subdued, however, I anticipate the price increases will be transitory.
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