Wednesday, April 26, 2017

Vancouver Teranet HPI and Inventory update

Long-time readers of this blog will be familiar with the model that mohican devised that relates house price index (HPI) changes to the ratio of for-sale inventory to monthly sales (months of inventory or MOI). Below is an update to this data series with some brief analysis.

The first graph plots the time series of the 6 month change in the Teranet Vancouver HPI and REBGV MOI. The correlation is clear from direct observation.

The second graph is a scatterplot of HPI change versus months of inventory, with a time shift to optimise for highest correlation.

And finally the same scatterplot but with year-on-year HPI change with a 6 month lag.

The only likely way to get higher MOI is to have higher inventory, and the advent of higher inventory takes many quarters to materialise (inventory is currently very low). It is for this reason that I do not foresee any significant house price relief in Vancouver in the next year to 18 months.


mohican said...

Agreed. This will take some time to unfold. Completions are coming. MOAR supply is coming. Demand may not change but tighter lending and scrutiny in that sector will play a part on the demand side. Again, that will take time.

jesse said...

Hi Mohican, yes there is some upwards relief for inventory coming in the way of higher unit completions. I am less familiar with the intricacies and changing regulatory environment on the demand side.

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