Saturday, May 05, 2007

Inventory Update


Grover Borequist said...

What do you guys think about the chances of seeing inventory go below last year's levels?

mohican said...

I would rate that chance as about 1 in 100. It is possible but not likely. It would necessitate a rapid increase in sales AND a substantial decrease in supply - both new construction and existing homes put on the market. This latter point would require a big psychological shift among individual home owners AND developers.

I just don't see a big inventory decline as very likely at this point. The trend is up, up, up.

macho slob said...


Mind telling us what prompted you to ask that question? which without further explanation is indeed quite puzzling, if not downright preposterous.

Grover Borequist said...

macho, the downtown false creek condo graph took a relative dip.

I'm no economist so please allow me to indulge in some baseless speculation - what if the people willing to take the risk of assuming a large mortgage are also willing to hang on to the property for a couple years before market conditions are conducive to making a profit?

As an aside:
I have a hard time convincing myself that we'll see a large drop in average prices without a significant external pressure like a reduction in employment. Historically speaking, haven't the last two housing bubbles (80s and 90s) burst because changing employment conditions?

-\/- said...

Well, all you have to do is look at the US.
Full-employment, great business cycle, increasing productivity....and crash!

freako said...

"macho, the downtown false creek condo graph took a relative dip. "

The actual dip is end of month listings expirations. There are a few imminent completions, such as Firenze. Those should pop up the listings. If they don't, it is still a "hot" market I guess.

I really doubt that FV will drop. I think that train has already left the station.

"I have a hard time convincing myself that we'll see a large drop in average prices without a significant external pressure like a reduction in employment. "

Time will tell, but we have been going up without improvements in these externals, so why not down as well?

macho slob said...


I confess that I don't know or care very much about specific pockets of Vancouver, as the entire V area has been driven beyond all levels of sanity. No market can continue to defy fundamentals forever, as the number of fools is finite.

Although unemployment contributed to the 81-82 crash, it did not cause the crash which began abruptly early in 81, while unemployment from the 82 recession peaked in 83.

It would be naive to think that the current recession jitters will not affect employment. It should also be remembered that our 81 crash was preceded by similar events in the usual bubble regions in the US.

I'm not aware of any time in the past when so many indicators have so clearly pointed to a crash:

-The tsunami from the subprime mortgage collapse is still building
-Affordability limits are exhausted
-Demographics are deteriorating as aging boomers are getting ready to downsize or unload their RE to fund their retirement
-Immigration has slowed with emerging prosperity in many Asian countries
-We're nearing the end of one of the longest economic expansions, as stock markets could tank along with RE, just like 82.

Grover Borequist said...

Thanks for your comments, V, freako and macho.

Macho, I haven't given much thought to the idea of boomers unloading their RE to fund their retirements. Have you got any stories/anecdotes to share on what has led you to believe this?

Personally, I've been telling my parents that it won't be much fun to play with their grandkids in a 700sqft condo. That has been a very effective deterrent to my mother's enthusiasm for condo shopping.

macho slob said...


Retiring boomers does not top the list of my reasons for predicting a lower market, but demographics is the only factor that is based on non-variable stats (unless we get hit with some unexpected catastrophy).

Even a small percentage increase of people selling for this reason could influence the market significantly.

Highly regarded demographers like Harry S. Dent Jr. believe that this will be the main driving force of the housing crash in North America. In the early 80's, he called for NA markets to start tanking around 2005-2006.