Tuesday, October 02, 2012

Greater Vancouver Market Snapshot September 2012

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to September 2012. (see REBGV news releases.)

The scatterplot of price changes and months of inventory is below. As the Teranet data roll in, look for more points appearing the right-hand side.

Commentary:

September continued with relative weakness compared to not only 2011 but also past years from 2005 (except the residual emerging from the recession of 2008-2009). September sales are near lows in at least the past decade, though close to levels seen in 2008.

This September was another weak report. Sales year-to-date are bad and this has direct effects on incomes of those who depend on resale turnover for income. This level of sales, if they continue to be weak, is going to translate into higher months of inventory (MOI) for the rest of the year (MOI is typically higher in the latter half of the year; an MOI of around 6 normally translates to flat prices) and concomitant price drops already starting to rear their heads in the posted MLS benchmark prices and medians. Prices (as measured by the August Teranet HPI), as predicted by this blog, are now year-on-year negative. I would not be surprised to see prices down -6% year-on-year by February or March of 2013.

As a recurring reminder, there are some worrying clouds on the horizon: population growth is falling, dwelling completions are set to increase over the next year if not longer, and banks are beginning to implement stricter mortgage guidelines in the form of changes to government-underwritten mortgage insurance qualification criteria and second, commencing now, via implementation of stricter mortgage lending guidelines under OSFI's new directives. Further stress in current conditions can be attributed to China's slowing economic growth.

On the other hand mortgage rates remain low, near net zero real territory, and it is possible for rates to remain low for a prolonged period (i.e. years). It looks likely that Asian economies are due for another round of investment spending through coordinated government stimulus measures -- not only in Asia but also in other jurisdictions -- and that can plausibly lead to a renewed, but in my view temporary, bout of current account flows into Vancouver-area property investments.

I put together two slideshows here and here on some housing market mechanics basics using Vancouver data, based on some input from other local bloggers.

I do not expect October 2012 sales to be as weak as those seen in 2008, however neither do I expect a marked rebound. Based on my estimates year-end sales are likely going to be around 24000.

Yet another weak report for resale housing activity in the Vancouver area.

2 comments:

AUTUIN said...

Excellent work as always, Jesse. Before these get reposted too widely -- there are two "i"s in the "Next Month Estimate" portion of the legend.

jesse said...

Fixed