Starts / Completions per New Person

Relating to the conversation in the previous post comments, here is a chart showing the ratio of housing starts and completions to new residents.

Where's that population boom?

We have all heard from the pumpers that one of the reasons for the great boom in housing prices in the 2000s was the population explosion in BC.

Those who remember my old blog will recall that booming population growth was shown to be nothing more than a myth. Population growth has indeed been positive. But it is very small relative to what was seen previously in BC.

The house price boom has been around about 10 years now. So, let's look at the 10-year population growth rate for BC.

See that little hook at the far right of the chart? That's as good as it gets. No boom.

To make this more stark, let's rank the decades.

Ouch. The 2000s are last among the previous 5 decades. The worst decade for population growth in 50 years. Nice population boom.

Now let's break that down even further into 5-year time periods.


There you have it. The last two 5 year periods are the worst two in the last 45 years. And 1995-1999 is in 3rd last place, to boot.

We had unprecedented construction levels and paltry population growth. I wonder who will be living in all those houses?

TD Bank Predicting House Prices to Drop

From TD Economics.

Our existing home sales and average price forecast for 2010 is largely unchanged since December 2009. We still expect 475K transactions to take place, with an average annual price
nearing $350K, an increase of 9% over 2009.

However, this hides an underlying shift occurring over the course of this year. While we anticipated sales and prices to be strong in the first half and to cool in the second half, we now expect this contrast between the two halves will be sharper.

A surprisingly robust economic recovery provides some offset in the form of higher employment and income, but a combination of factors suggests a weaker handoff to 2011 than previously expected.

One crucial factor is the supply side response (listings) to higher home prices. While it was slow to appear, it is now stronger than had been expected. Housing starts have also been slightly higher than anticipated at 200K units in Q1/2010.

While we previously expected the average home price to gain a modest 1.6% in 2011 (stagnating in real, or inflation-adjusted terms), we now expect a modest pullback of 2.7% at the national level, with 7 out of 10 provinces experiencing lower prices.

Fraser Valley Real Estate - April 2010

Here are the charts:

Active listings are increasing at the same pace as 2008.


Sales are still brisk but May could mark a turning point as it did in 2008.


Months of inventory is at the high side of normal and looks to be matching 2008. It will take a drop in sales to get to the extremely elevated levels of market distress we saw in 2008.



Correlation between MOI and price changes is extremely robust and we should be looking for price decreases through the summer if normal seasonal patterns hold up.

Comparing US Prices at peak to Canada Today

It's always refreshing to see new data to analyse but it's equally as refreshing to see existing data analysed in a different way. Over at vancouvercondo.info poster vibe performed some analysis comparing the price-income ratios in Canada today to the US in 2006, around the peak of their prices [jesse: I inserted an updated graph]:

"...there was some discussion about whether Canada is in a real estate bubble. Everyone pretty much agrees about Vancouver, but here are a couple of points that were made about the national scene:

1. It is reasonable to claim that there is not a housing bubble in Canada because only certain areas are over inflated.
2. Vancouver's very high prices skew the national average and cause Canada to look worse than it really is.

One thing I think we can all agree on is that the US did have a housing bubble. Well I put together a spreadsheet that I feel shows that affordability is about as bad across Canada as it was in the US at their peak. It also shows that Vancouver is not skewing our national data any more than the most overpriced cities in the US were skewing their data. In order to measure affordability I used house price to personal income ratios. I compared the 20 cities used in the Case Shiller Housing Index to the 6 cities used in the Teranet Housing Index. The US data is from 2006 while the Canadian data is from 2009.

I think the following graph most clearly illustrates my point:

Vancouver is the only Canadian city with a ratio over 9, while the US had 3: LA, San Fran and San Diego. Toronto is the only Canadian city with a ratio between 5 and 9, the US had 9 in this range. The under 5 range looks bigger for Canada but we have more population covered by our index than they do by theirs. The important thing is that the percentage of each nations population living in cities with elevated ratios is similar.

The distribution and average ratios for both countries are almost identical.

(Highlighting above is mine.)

Almost identical.

These data would be less of a concern if sales volume were low but, based on the volume of sales in the past several years, we know a not-insignificant portion of the population have bought at high prices. In addition we know the make-up of personal debt in Canada has been trending into the "unsustainable" territory, throwing into serious question the argument that future income gains justify high prices, even in part.

Gird yer loins!