Wednesday, July 03, 2013

Greater Vancouver Market Snapshot June 2013

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to June 2013. (see REBGV news releases.). (My "next month estimate" numbers are what I think next month will be. Also note these graphs update automatically so older blog posts from previous months will show the same graphs as the ones below.)

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. May 2013 reported was about -2% year-on-year, which is slightly higher than I expected but not what I would consider anomalous. This gives us some indication on how elevated MOI must become to elicit meaningful price drops.


June sales continued with relative weakness compared to most past years from 2005 however have continued a general improving trend to exceed last year. June sales are now off the lows of the past decade. A general improvement of sales can plausibly continue through the rest of the year, but will likely be below highs of the last decade.

To partially compensate for weekend framing effects I have plotted sales per working day on a month-by-month basis.

This June saw another weak report, though the trend of improving sales is encouraging. Cumulative sales for the year are still below recent past years and this has direct effects on incomes of those who depend on resale turnover for income. As the months progress it becomes more and more difficult to hit yearly sales targets in-line with those seen in the last decade. That stated a nascent resurgence in listings volumes is underway and if strength continues, the second half of the year will make up for the sluggish start.

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 have implemented stricter mortgage guidelines via changes to government-underwritten mortgage insurance qualification criteria and via implementation of stricter mortgage lending guidelines under OSFI's new directives, and it looks like they're not done tightening. Further stress in current conditions can be attributed to China's slower 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. several years). That stated, longer-term 5-year-term loan rates may have some room to move up in the coming year (as they did, at least acutely, with a vengeance in May and June) as the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.

Emerging Asian economies are starting to stall again after last year's stimulus from China has mostly run its course. I expect this will start wearing on foreign-derived income that could end up financing Vancouver-area property purchases. I expect further stimulus bouts in the years to come.

My estimates for June were for inventory of 17410 (actual 17289) and sales of 2406 (actual 2642) based on estimating average changes from May of years 2005-2012. Using the same technique estimates inventory and sales for July of 16823 and 2530 respectively (MOI=6.6). The spring is typically the nadir for MOI in recent years, the exception being 2009 that saw MOI decrease throughout the year. Taking a "hybrid" approach would suggest July's MOI to be higher than June's, mostly due to lower sales typical in the summer.

No comments: