Sales were seasonally slow as expected in December with 1001 units sold during the month. At the end of December there were 7168 residential units available for sale in the Fraser Valley. This puts the current months inventory at 7.2. This is the highest December level for as far back as online records are available.
Prices of all types of homes rose during the month of December in nearly every area in the Fraser Valley pulling a rabbit of the hat of sorts for the month. I did not expect prices to rise in a market so full of choices for buyers. It is possible that the smaller level of sales led to a different mix of sales being completed and December buyers could be more 'urgent' buyers than is typical for the rest of the year.
The year over year change in the quality adjusted house price index has been declining from the peak appreciation levels of mid-2006 and it is a trend I expect will continue through 2008. We may even see negative YOY price changes this year.
As I have already mentioned, Months of Inventory was quite high at 7.2 months during December. Quarterly price changes were muted although positive. If months of inventory stays high during January and February there will be significant negative price pressure coming into the spring selling season.
The market continues to amaze me with an incomprehendable amount of demand at these price levels. I fail to understand why someone would buy a home that they can rent for half the monthly nut.
Mohican's 2008 Forecast for the FVREB:
1) Months of Inventory will remain above 6 for the entire year.
2) YOY appreciation will be 0% or negative by July/August.
3) The FVREB House Price Index will be -5% to -10% for 2008. December 2007 is the all time high at 220.3 and it will be 200 to 205 by the end of the year.
Note: If MOI drops below 6 I think that the price changes will not be as negative as I suggest. Of course this is all hypothetical and I've been wrong before.
11 comments:
In looking at the inventory trends you present, it seems that this might be the year where your forecasts prove correct.
Quick Q - are condo assignments included in this analysis?
have a look at rennie's assignments here... By the looks of it, Rennie's "intellectual property" is certainly going to be an item of discussion again this year.
Vancouver $700 psf assignment buyers please contact me immediately.. . i have an excellent deal for you on some rain water.
Condo assignments and most new home inventory is not included.
There will be over 10,000 new homes completed in the Fraser Valley alone in 2008 and the absorbtion potential is low with population growth being as low as it is.
Killer analysis!!
REBGV stats for Dec are posted:
http://www.nvcondos.ca
Also some commentary on my blog:
http://paul-northvancouverhomes.blogspot.com/
The year over year change in the quality adjusted house price index has been declining from the peak appreciation levels of mid-2006 and it is a trend I expect will continue through 2008.
I have little faith in FVREB's benchmarking. Their HPI also showed the White Rock anomaly (down double digits one month, up double digits the next).
Still it is more reliable than the median, or god forbid, the average.
Mohican
10,000 units completed in the FV in 2008 translates to the housing needs of roughly 25,000 persons. This figure approaches (or may even exceed) annual population growth for the entire GVRD. Are we talking about a tremendous over-supply in the making here?
Madness, all of it!
Johnnyrent:
Avg population growth for Greater Vancouver has been approximately 28000/year over the last 5 years.
Yeah there's a massive oversupply, many units are not reported in those numbers, in my neighbourhood (4 block radius in kits) there's been approximately a 10% increase in living space due to house conversions from 1-3 suites to 4-6 suites, at least averaging one on every side of every block.
Yes there ALREADY IS a massive oversupply and the oversupply will only increase this year unless an extra 40-50k more people decide to move to the area this year to absorb all of the housing units.
The issue is that in 2006 and 2007 there were an average of 1.85 new persons for every completed new housing unit in the Vancouver area and 2008 will likely be even lower. The average number of people per household is 2.7 so assuming we were at an equilibrium point at some point during 2006 we have enough extra housing for 20,000 - 40,000 more people than currently live in the area. This is roughly equal to one year's population growth. Barring a doubling of the population growth in 2008 this existing supply will be added to by the 2008 new completions of approximately another excess 20,000 persons. This would leave us in a situation where an entire city the size of Kamloops would need to move to the area to absorb all of the supply.
The situation may be better or worse than this but devoid of any hard numbers on vacancies I think these are reasonable figures.
"there's been approximately a 10% increase in living space due to house conversions from 1-3 suites to 4-6 suites"
This is true with almost all new SFHs being built. That said, some (suburban) areas are seeing a population decrease as children leave home. Also there are more foreign students around but it is difficult to say if their numbers will continue to increase (and could start to decrease). So the numbers are offset, though nowhere near enough to nullify the supply overhang.
I've been checking Port Moody MLS listings for condos now and then, and there appears to have been a substantial reduction in listings just recently. The lowest-priced condo listed is $289,900 (735 s.f.). It seems to me that all the "affordable" condos (i.e. closets) have already been bought, and all that is left are the larger units that nobody can afford. Mind you, there are still a few closets on the market there. A 580 s.f. condo is selling for $309,900. "Port Moody's distinctive new loft address, 'ROOM' is a seven storey loft-style boutique building located in the heart of vibrant Suter Brook Village." Ha! "Room" is right, all you get is one room!
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