Tuesday, March 26, 2013

Comparing Canadian and US House Prices

To compare Canadian and US house prices we can use the US-based Case-Shiller house price indexes overlaid with the Canadian-based Teranet house price indexes. The two share comparable methodologies, using same-sales pairs with extraneous discards. Since the house price indexes are referenced to a point in time, and not a specific valuation, we will need to re-scale the results to some value for an apples-apples measure. I produced these results about a year ago and have updated the values to the latest data. The incongruity between US and Canadian HPIs is evident:

The Case-Shiller  uses a baseline of January 2000 = 100, the Teranet is June 2005. If, for example, Canada was in the midst of a speculative bubble in 2005 and the US were more fairly-valued in 2000, it means the scaling factor for Canadian cities will under-report gains. One method to compensate for this is to re-scale the indexes and align the troughs:
This graph finds the minimum indexes in the 1990s and rescales those values to be 100. Then the data are time-shifted to align these minima. I have CPI-deflated the results. Based on this measure, for what it's worth, while Vancouver is currently more overvalued than any US city, index gains over the past year have vaulted cities like San Francisco and San Diego to be rather close to Vancouver. As a sidenote, Jim Sutherland, a local reporter, opined to me last Wednesday that some coastal US cities are showing valuations approaching those of Canadian cities, even Vancouver. This simple analysis would tend to support this view.

Saturday, March 23, 2013

Teranet March 2013

MARCH 2013


In February the Teranet-National Bank National Composite House Price Index™ was up 2.7% from a year earlier, matching January's smallest 12-month gain since November 2009. By way of comparison, the U.S. Case-Shiller home price index (20 metropolitan markets) for December (the latest available reading) was up 6.8% from a year earlier. In Canada, the rise over the 12 months ending in February exceeded the cross-country average in six of the 11 markets surveyed for the national composite index: Halifax (6.3%), Quebec City (5.3%), Hamilton (6.5%), Toronto (4.9%), Calgary (3.6%) and Winnipeg (4.0%). Edmonton matched the average (2.7%). Lagging it were Ottawa-Gatineau (+2.4%), Montreal (2.0%), and Victoria (0.7%). Prices in Vancouver were down 1.5% from a year earlier, for a seventh month of 12-month deflation.

Teranet – National Bank National Composite House Price Index™

Contact Us

For general enquiries:


For licenses covering all index-linked products, please contact:

Simon Côté
514 879-5379
The February composite index was down 0.2% from January, a sixth straight monthly decline. Prices were down from the month before in seven of the 11 markets. For Hamilton (−0.3%) it was the second consecutive monthly decline, for Calgary (−1.2%) it was the third, for Edmonton (−0.4%) the fourth, for Toronto (−0.3%) the fifth and for Montreal (−0.4%) the sixth. The other two markets in which prices were down from the month before were Victoria (−1.4%) and Ottawa-Gatineau (−0.8%). Prices were up 0.7% on the month in Vancouver, only the second monthly gain in eight months, and 0.8% in Winnipeg, a first in five months. Prices rose 0.9% in Quebec City, to reach a new all-time high for the second month in a row, and 0.1% in Halifax, to match last September's all-time high.

Teranet – National Bank House Price Index™

The historical data of the Teranet – National Bank House Price Index™ is available at www.housepriceindex.ca.
Metropolitan areaIndex level
February 2013
% change m/m% change y/y
Calgary159.02-1.2 %3.6 %
Edmonton164.37-0.4 %2.7 %
Halifax142.420.1 %6.3 %
Hamilton139.00-0.3 %6.5 %
Montreal147.24-0.4 %2.0 %
Ottawa140.15-0.8 %2.4 %
Quebec177.040.9 %5.3 %
Toronto145.84-0.3 %4.9 %
Vancouver165.720.7 %-1.5 %
Victoria139.48-1.4 %0.7 %
Winnipeg188.190.8 %4.0 %
National Composite 6151.56-0.2 %2.5 %
National Composite 11152.72-0.2 %2.7 %
The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given at www.housepriceindex.ca

The Teranet–National Bank House Price Index™ is an independently developed representation of average home price changes in six metropolitan areas: Ottawa, Toronto, Calgary, Vancouver, Montreal and Halifax. The national composite index is the weighted average of the six metropolitan areas. The weights are based on aggregate value of dwellings as retrieved from the 2006 Statistics Canada Census. According to that census1, the aggregate value of occupied dwellings in the metropolitan areas covered by the indices was $1.168 trillion, or 53% of the Canadian aggregate value of $2.207 trillion.

All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.

Wednesday, March 20, 2013

BC Population Growth to Q4 2012

BC Stats released its quarterly population estimates and BC continues sluggish growth through Q4 2012.

Population growth consists of the following bulk components:
  • Natural increase (births - deaths)
  • Net interprovincial migration
  • Net international migration (including permanent and non-permanent residents (NPRs))
So let's look at how recent quarters look in a historical context, here graphed since 1961 to show longer-term trends (there is seasonality so quarters are best compared to each other, also do not integrate these graphs, the total population is periodically adjusted during census counts):

The most recent Q4-2012 data indicate continued negative net interprovincial migration (2234 net out of the province). The low international component was in big part due to a large net negative NPR component of -5597

Here is the annual graph:

Population growth through fourth quarter of 2012 is below its peak of late last decade, due in most part to net out-migration to other provinces and below-average net international migration. Annual growth has dropped 50% since its recent local peak in 2007, meaning annual population growth in 2012 was about 38,000 fewer than 2007. This will have a direct and negative impact on housing demand in the coming quarters. Interprovincial out-migration is of continued concern, with more people leaving the province for others than arriving.

Saturday, March 09, 2013

BC Employment by Sector February 2013

Below are some graphs highlighting Vancouver's and BC's employment over the past 15 years in various sectors. But first here are the historical employment, participation, and unemployment rates (CANSIM tables 282-0117 and 282-0087)

The participation rate has not recovered. Work by Calculated Risk indicates that most of the decline in participation rate in the US is demographic-based and not necessarily a sign of long-term "disillusioned" unemployed. I would expect a similar demographic effect to exist in Canada and BC.

The labour rate spreads between the rest of BC and Vancouver CMA are graphed below. A positive number means the rest of the province has a higher number than Vancouver. In terms of unemployment Vancouver has typically been about 50bps lower than the rest of the province, but lately that differential has been negative.

Here are the contributions of the two major goods producing sectors (construction and manufacturing) as a percentage of total employment. These are seasonally unadjusted with 3 month moving average applied (CANSIM table 282-0111).
Construction employment as a percentage of total employment is near highs of at least the past 20 years. The service producing sectors (NSA) (12 month average):

Monday, March 04, 2013

Greater Vancouver Market Snapshot February 2013

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to February 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. I would not be surprised to see the Teranet HPI down between -6% and -4% year-on-year by February or March of 2013.


February sales 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). February sales are near lows in at least the past decade, though above levels seen in 2009.

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

This February saw another weak report. Sales for the year are bad and this has direct effects on incomes of those who depend on resale turnover for income.

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. (Credit Unions are one notable exception though it appears BC CUs will comply with the brunt of OSFI guidelines.) Further stress in current conditions can be attributed to China's slower economic growth, though it looks like growth is set to resume some entering 2013; for how long this growth can continue is uncertain.

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 the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.

Asian economies are currently meting out another round of investment spending through coordinated government stimulus measures -- and 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. Investment trends in China are difficult to ascertain.

My estimates for February were for inventory of 14335 (actual 14789) and sales of 1891 (actual 1797) based on estimating average changes from January of years 2005-2012. Using the same technique estimates inventory and sales for March of 16067 and 2237 respectively (MOI=7.2). March is typically the nadir for MOI in recent years, the exception being 2009 that saw MOI decrease throughout the year. If 2013 turns into 2012 redux, but at a lower base of sales and a higher base of inventory, that portends more seasonally-adjusted price drops. To hit some forecasters' call for flat to rising sales volumes for REBGV in 2013 compared to 2012, there are going to need to be some rabbits on order.