April 2008 CMHC Data

CMHC released their monthly Housing Now publication for the Vancouver / Abbotsford areas this morning and here is the data for the Vancouver Census Metro Area.

Starts: 1560
Completions: 2328
Under Construction: 26253 (21910 Condos, 3737 Freehold, 606 Rental)
Completed and not Absorbed: 1445 (up 23% from last April)

I expect we'll see a couple months this year where completions are in the 3000 to 4000 range. This will reduce the number of units under construction and reduce the number of people employed in these residential construction projects. The completions will free up labour and hasten the completion of the remaining projects and these expected completions combined with the wrap up of several billion dollars worth of infrastructure projects will likely push the BC economy into recession by early 2009.

Unprecendented isn't even the right word to describe the current number of units under construction. Bubblicious - perhaps.

The majority of the BC economy is a farce. We have an economy that is built on ever increasing home values, condo speculation, rampant consumption, and the psychology of prosperity without the actual prosperity. Aside from a couple of bright spots like our agriculture, natural gas and mining sectors the BC economy is a house of cards. When the economic winds get blowing like they are now, our house of cards will fall.

Life, the Universe, and Everything

Thinking about the markets, real estate, life, the universe and everything brought to mind this poem. Enjoy.

The Tide Rises, the Tide Falls by Henry Wadsworth Longfellow.

The tide rises, the tide falls,
The twilight darkens, the curlew calls;
Along the sea-sands damp and brown
The traveler hastens toward the town,
And the tide rises, the tide falls.

Darkness settles on roofs and walls,
But the sea, the sea in darkness calls;
The little waves, with their soft, white hands
Efface the footprints in the sands,
And the tide rises, the tide falls.

The morning breaks; the steeds in their stalls
Stamp and neigh, as the hostler calls;
The day returns, but nevermore
Returns the traveler to the shore.
And the tide rises, the tide falls

BC Non-Residential Construction

Good morning,

Well, we've had a couple days to let that partial yet massive list of projects sink in so now let us look at some data and charts to illustrate the point further. The point being that BC not only has a housing bubble but a construction bubble fueled by loose lending and speculation in the residential sector and by government largesse in the non-residential sector. Hat tip to van_coffee for the data - thanks.

First chart illustrates the nominal value of building permits issued. Note: this only includes 'buildings' not infrastructure like highways, bridges, skytrain, etc. See definitions via Statscan.


Build those strip malls. I'm not exactly sure how the statisticians classify projects but we can see from the previous couple of posts where the bulk of the non-residential construction spending is going. Many government projects like the trade and convention centre are likely classified as a commercial project although it is in fact a government project.

This chart illustrates the value of building permits issued when adjusted for inflation and population.

Real per capita spending on non-residential construction has risen dramatically after a long decline period during the nineties. We can also see what a slowing economy and a tightening of lending standards does to non-residential construction by looking at the early eighties contraction as an example.

Please not that these numbers DO NOT include the massive infrastructure projects that are happening and worth upwards of $5 Billion in the Vancouver area alone.

. . . . and even more Construction - Vancouver

Here is a listing of all major projects in the City of Vancouver as of March 2008 according to the BC Major Projects Inventory. The projects listed on this page represent over 5% of the GDP of British Columbia. I was amazed at how many of these projects are government money. One could say that the intervention of government project funding has caused the labour shortage that is often talked about here.

Ecole Secondaire Francophone de Vancouver
Status: Construction started Start: Jun 2007
Est. Cost ($ million): 25 Finish: Fall 2008

UBC Renew - Building Renovation Program
Status: Construction started Start: 2003
Est. Cost ($ million): 120 Finish: 2011

Patina Condominium Tower
Status: Construction started Start: Mar 2008
Est. Cost ($ million): 35 Finish: Feb 2011

Coast Coal Harbour Hotel
Status: Construction started Start: Fall 2007
Est. Cost ($ million): 60 Finish: Fall 2009

Vancouver Social Housing
Status: Construction started Start: Early 2008
Est. Cost ($ million): 80 Finish: 2009

Atelier on Robson Highrise Condominiums
Status: Construction started Start: Spring 2008
Est. Cost ($ million): 140 Finish: Fall 2009

Killarney and Trout Lake Arena Reconstruction
Status: Construction started Start: Dec 2007
Est. Cost ($ million): 30 Finish: Feb 2009

Renaissance Hotel Renovation
Status: Construction started Start: Jan 2008
Est. Cost ($ million): 20 Finish: 2009

The Zone Condominium Development
Status: Construction started Start: Jul 2007
Est. Cost ($ million): 20 Finish: Late 2008

UBC - Wesbrook Place Residential Development
Status: Construction started Start: Early 2007
Est. Cost ($ million): 200 Finish: 2015

Cross Roads Mixed-use Development
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 30 Finish: Fall 2008

Espana Condominiums
Status: Construction started Start: Spring 2007
Est. Cost ($ million): 65 Finish: 2009

Foundry Residential Development
Status: Construction started Start: Summer 2007
Est. Cost ($ million): 20 Finish: Summer 2008

Pacific Boulevard Improvements
Status: Construction started Start: Sep 2006
Est. Cost ($ million): 20 Finish: Early 2011

Residential Development - 5951 Balsam Street
Status: Construction started Start: Early 2008
Est. Cost ($ million): 20 Finish: Fall 2009

Residential Development
Status: Construction started Start: Jun 2007
Est. Cost ($ million): 25 Finish: Late 2009

Vancouver Aquarium Expansion and Revitalization
Status: Construction started Start: Nov 2007
Est. Cost ($ million): 80 Finish: 2009

1022 Seymour Street Residential Tower
Status: Construction started Start: Summer 2007
Est. Cost ($ million): 30 Finish: Late 2008

Secondary School
Status: Construction started Start: Early 2007
Est. Cost ($ million): 22 Finish: Jul 2008

The Donovan High Rise Condominium
Status: Construction started Start: Fall 2007
Est. Cost ($ million): 20 Finish: Late 2009

The Keystone Residential Development
Status: Construction started Start: Early 2007
Est. Cost ($ million): 20 Finish: Summer 2008

The Vita Residential Development
Status: Construction started Start: Apr 2007
Est. Cost ($ million): 40 Finish: 2009

Camera Residential Development
Status: Construction started Start: Jun 2007
Est. Cost ($ million): 20 Finish: Late 2008

Capitol Residences
Status: Construction started Start: Feb 2007
Est. Cost ($ million): 40 Finish: Late 2008

Cambie and Second Avenue Shopping Center
Status: Construction started Start: Sep 2005
Est. Cost ($ million): 29 Finish: Nov 2009

Raffles on Robson Residential Tower
Status: Construction started Start: Jan 2006
Est. Cost ($ million): 35 Finish: Jun 2008

Stella Residential Development
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 25 Finish: Fall 2008

Canadian Broadcasting Corporation Studio Renovation
Status: Construction started Start: Aug 2006
Est. Cost ($ million): 20 Finish: Fall 2009

Homer and Helmcken Residential Tower
Status: Construction started Start: Spring 2006
Est. Cost ($ million): 30 Finish: Fall 2008

Queen Elizabeth Theatre Renovation
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 35 Finish: 2009

Ritz-Carlton Hotel and Residential Development
Status: Construction started Start: Summer 2007
Est. Cost ($ million): 500 Finish: 2009

The Rise Development
Status: Construction started Start: Spring 2005
Est. Cost ($ million): 62 Finish: Spring 2008

TV Tower and TV Tower Two
Status: Construction started Start: Early 2007
Est. Cost ($ million): 80 Finish: Dec 2008

UBC - Museum of Anthropology Renewal Project
Status: Construction started Start: Jun 2006
Est. Cost ($ million): 52 Finish: Spring 2009

Vandusen Garden Renovation Project
Status: Construction started Start: Spring 2005
Est. Cost ($ million): 20 Finish: 2010

The Sapphire Residential Development
Status: Construction started Start: Mar 2006
Est. Cost ($ million): 60 Finish: May 2008

Coopers Quay Residential Development
Status: Construction started Start: Nov 2004
Est. Cost ($ million): 500 Finish: Summer 2008

Flatiron Residential/ Commercial Development 1277 Melville
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 30 Finish: Early 2009

Jameson House
Status: Construction started Start: Early 2008
Est. Cost ($ million): 180 Finish: 2010

Metro Residential Tower
Status: Construction started Start: Late 2006
Est. Cost ($ million): 25 Finish: Spring 2008

ICORD Spinal Cord Research Centre
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 47 Finish: Summer 2008

Grosvenor Retail and Residential Development - 485 West Eight Ave.
Status: Construction started Start: Summer 2004
Est. Cost ($ million): 50 Finish: Spring 2008

Mode Residential Development
Status: Construction started Start: Spring 2007
Est. Cost ($ million): 30 Finish: Early 2009

Shangri-La Hotel and Condominium Development
Status: Construction started Start: Mar 2005
Est. Cost ($ million): 350 Finish: Late 2009

The Ritz Residential Tower
Status: Construction started Start: Late 2005
Est. Cost ($ million): 50 Finish: Spring 2008

728 Pacific Boulevard Residential Towers
Status: Construction started Start: Mar 2005
Est. Cost ($ million): 150 Finish: 2009

Vancouver Community College Expansion - King Edward Campus
Status: Construction started Start: Early 2007
Est. Cost ($ million): 56 Finish: Fall 2008

Beulah Gardens - 2075 Cassiar Street
Status: Construction started Start: Sep 2004
Est. Cost ($ million): 38 Finish: Early 2008

Providence Legacy - Assisted Care Facility
Status: Construction started Start: Nov 2006
Est. Cost ($ million): 21 Finish: Jun 2008

UBC - University Town
Status: Construction started Start: 1999
Est. Cost ($ million): 350 Finish: Summer 2015

Beach Crescent Neighbourhood - False Creek North Shore
Status: Construction started Start: 2002
Est. Cost ($ million): 3000 Finish: Late 2008

Mount Pleasant Community Centre - 1 Kingsway
Status: Construction started Start: Summer 2005
Est. Cost ($ million): 26 Finish: Sep 2008

Beaty Biodiversity Research Centre
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 40 Finish: Nov 2008

Olympic Games - Hillcrest/ Nat Bailey Park Stadium Park
Status: Construction started Start: Feb 2007
Est. Cost ($ million): 38 Finish: Dec 2008

Olympic Games—University of British Columbia Thunderbird Sports Centre
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 49 Finish: Apr 2008

Olympic Games - Vancouver Olympic Village
Status: Construction started Start: May 2007
Est. Cost ($ million): 315 Finish: Sep 2009

Simon Fraser University—School for the Contemporary Arts Building
Status: Construction started Start: Fall 2006
Est. Cost ($ million): 71 Finish: Fall 2008

UBC—Marine Drive Student Housing
Status: Construction started Start: Sep 2004
Est. Cost ($ million): 136 Finish: Sep 2008

955 and 969 Burrard Street—Residential Tower and New YMCA
Status: Construction started Start: Early 2007
Est. Cost ($ million): 120 Finish: 2009

Fairmont Pacific Rim Vancouver Hotel
Status: Construction started Start: Sep 2005
Est. Cost ($ million): 420 Finish: Summer 2009

Vancouver Convention Centre Expansion
Status: Construction started Start: Fall 2007
Est. Cost ($ million): 700 Finish: 2010

Broadway Tech Centre
Status: Construction started Start: 2002
Est. Cost ($ million): 80 Finish: 2012

Coal Harbour Redevelopment
Status: Construction started Start: 1992
Est. Cost ($ million): 1000 Finish: Fall 2008

International Village Phase 2
Status: Construction started Start: Fall 2004
Est. Cost ($ million): 150 Finish: Spring 2008

Woodward’s Building Redevelopment
Status: Construction started Start: May 2007
Est. Cost ($ million): 300 Finish: Dec 2009

Total number of major projects in the City of Vancouver: 66
Total value of all major projects in the City of Vancouver: $10,432,000,000
Majority of work is complete by late 2008 through early 2009.

You may ask where the YVR expansion and Canada Line are and they are categorized under Richmond for an additional $3,775,000,000 in development costs. Both those major projects complete in 2009.

What happens when all those projects finish, all the money is spent and all the workers go home?

. . . . and More Construction - Surrey

Surrey Major Projects according to the March 2008 BC Major Projects Inventory.

Urban Village Condominium Development
Status: Construction started Start: Oct 2007
Est. Cost ($ million): 1000 Finish: 2009

156th Street Underpass
Status: Construction started Start: Dec 2007
Est. Cost ($ million): 20 Finish: Spring 2009

Tate Rowhouse Condominiums
Status: Construction started Start: Spring 2008
Est. Cost ($ million): 20 Finish: Spring 2009

City Point Highrise Condominiums
Status: Construction started Start: Mar 2008
Est. Cost ($ million): 30 Finish: Late 2009

Quattro Residential Development
Status: Construction started Start: Fall 2007
Est. Cost ($ million): 600 Finish: Late 2009

Rosemary Heights Seniors Village
Status: Construction started Start: Nov 2006
Est. Cost ($ million): 20 Finish: Jun 2008

Laurel Place Seniors Residences
Status: Construction started Start: Sep 2006
Est. Cost ($ million): 40 Finish: Spring 2008

St Andrews at Northview Residential Development
Status: Construction started Start: Summer 2006
Est. Cost ($ million): 40 Finish: Summer 2008

Surrey Health Services Capacity Initiative
Status: Construction started Start: Fall 2007
Est. Cost ($ million): 214 Finish: 2011

St. Andrews at Northview Condominiums
Status: Construction started Start: Spring 2006
Est. Cost ($ million): 30 Finish: Fall 2008

The Veranda Townhomes
Status: Construction started Start: Spring 2006
Est. Cost ($ million): 30 Finish: Early 2008

d’Corize Residential Tower
Status: Construction started Start: Sept 2005
Est. Cost ($ million): 30 Finish: Spring 2008

Fraser Highway Widening
Status: Construction started Start: Jun 2005
Est. Cost ($ million): 45 Finish: Spring 2008

The Aura Residential Development
Status: Construction started Start: Aug 2005
Est. Cost ($ million): 20 Finish: Spring 2008

Central City Neighbourhood
Status: Construction started Start: Jun 2005
Est. Cost ($ million): 1000 Finish: 2009

Ixia Townhouse Development - 19219 - 67 Ave
Status: Construction started Start: Jan 2006
Est. Cost ($ million): 25 Finish: Early 2008

Payal Business Centre
Status: Construction started Start: Spring 2004
Est. Cost ($ million): 50 Finish: Late 2008

Compass Townhouse and Apartment Development
Status: Construction started Start: Nov 2006
Est. Cost ($ million): 43 Finish: Spring 2009

Grandview Corner Shopping District
Status: Construction started Start: Spring 2006
Est. Cost ($ million): 80 Finish: 2009

North Surrey Auto Mall
Status: Construction started Start: Jun 2005
Est. Cost ($ million): 75 Finish: 2009

Fraser River Port Expansion
Status: Construction started Start: Summer 2004
Est. Cost ($ million): 190 Finish: 2011

Border Infrastructure Project - Highway 10
Status: Construction started Start: Jun 2005
Est. Cost ($ million): 93 Finish: Oct 2008

Campbell Heights Business Park
Status: Construction started Start: Summer 2004
Est. Cost ($ million): 50 Finish: 2009

Elim Village Seniors Housing Development
Status: Construction started Start: Sep 2000
Est. Cost ($ million): 75 Finish: Early 2008

Guildford Park Place
Status: Construction started Start: Spring 2003
Est. Cost ($ million): 30 Finish: Spring 2008

Number of major projects in the City of Surrey: 25
Value of major projects in the City of Surrey: $3,850,000,000
The year most of the work is done: Late 2008 to early 2009

What happens when the projects finish, all the money is spent and the workers go home?

Construction and more Construction - Langley

This information is from the March 2008 BC Major Projects Inventory.

Langley Airport Expansion
Status: Construction started Start: Sep 2007
Est. Cost ($ million): 20 Finish: Late 2008

Willoughby Community Recreation Centre
Status: Construction started Start: Fall 2007
Est. Cost ($ million): 56 Finish: Late 2008

South Village Condominium Development
Status: Construction started Start: May 2007
Est. Cost ($ million): 40 Finish: 2009

North East Gordon Estates Residential Development
Status: Construction started Start: Fall 2007
Est. Cost ($ million): 80 Finish: 2010

The Village at Thunderbird Centre
Status: Construction started Start: Late 2005
Est. Cost ($ million): 50 Finish: Sep 2009

Gateway 200 Business Park
Status: Construction started Start: Summer 2004
Est. Cost ($ million): 20 Finish: 2010

Golden Ears Bridge
Status: Construction started Start: Jun 2006
Est. Cost ($ million): 808 Finish: Summer 2009


Bedford Landing
Status: Construction started Start: Late 2006
Est. Cost ($ million): 400 Finish: 2009

Total major projects currently underway just in Langley: 8
Cost of major projects currently underway just in Langley: $1,454,000,000
Majority of work is complete by late 2008.

What happens when all those projects finish, all the money is spent and all the workers go home?

Housing market slowing down

From the Vancouver Sun
Bank report says Saskatchewan to follow Alberta's lead in long-awaited cooling off

Eric Beauchesne
Canwest News Service
Friday, May 23, 2008

OTTAWA -- Canada's long-running housing boom has ended, with the formerly bubbling markets of Calgary and Edmonton already having gone from hot to not, and with the current hot spots of Saskatoon and Regina to follow, a major Canadian bank says.

Mortgage-market innovation delayed the inevitable but couldn't prevent it, Royal Bank of Canada said in its analysis of major urban real estate markets Thursday.

"After yet another blockbuster year for Canada's housing markets in 2007, the much-anticipated housing market slowdown in Canada has arrived," RBC said.

"The delayed arrival of softer housing markets can be partly attributed to recent mortgage innovation that has seeped into the Canadian market during the last two years," it said, citing higher loan-to-value ratios and longer amortization periods of up to 40 years, which opened the market to a wider range of buyers and prolonged the housing boom.

The mortgage-market innovations, which make housing more affordable in the short term, also heighten the risk of default in the long term, it said.

Markets in the West, which have risen the furthest above their underlying values, are the most at risk of an increase in defaults as a result of recent mortgage innovations, the report's author, RBC economist Amy Goldbloom, said in an interview.

However, there will not be a U.S.-style correction, despite such concerns in markets like Calgary and Edmonton, said the report, released amidst further evidence of the depth of the U.S. housing market meltdown -- a record drop in a government index of housing prices in the first quarter of this year.

"Canada's housing market is on much firmer footing than the U.S. market," it said, citing more conservative mortgage lending practices, healthy household finances, tight labour markets, and a manageable supply of homes on the market.

Still, after six years of 10-per-cent or better house price increases in major markets and four years of annual construction starts of more than 220,000, Canadian housing markets are now on a clear cooling path with resales last month being down six per cent from a year earlier, price gains from a year earlier slumping to the three-per-cent range, and the number of homes being listed for sale surging by 18 per cent.

"For the year ahead, we're looking at price gains to converge across the country to a much slower pace, with the west cooling off from double digits and central Canada cooling off further to the low single digit range," Goldbloom said. "By year end we expect most markets will be eking out mild price gains."

"The markets that soared well above their underlying economic fundamentals are the very ones with the most downside potential," the report said. "Calgary and Edmonton have moved from chart-toppers to bottom-of-the heap in only a matter of months on a range of key housing market indicators, including house prices and sales."
Saskatchewan has since jumped into the housing market spotlight as its commodity-led economic expansion has attracted an influx of migrants and led to a major housing market boom, it said.

"Regina and Saskatoon continue to clock year-over-year price gains that are several multiples above the pace of their local wage growth," it noted. "This lends evidence that current momentum is unsustainable, with a similar fate to Alberta's likely for both of these cities in a year's time."
© The Vancouver Sun 2008

300th Post and I'm at Housing Bubble Ground Zero

Happy 300 posts and nearly 300,000 visitors!

I sat back today and assessed how my personal housing situation has changed in the past few years. My wife and I bought a condo in 2004 for a reasonable price that made our mortgage payments plus strata and property taxes less than the cost of renting. We were happy with our purchase and paid down our mortgage quickly, starting with a 15 year amortization and making double payments until we sold the unit last August for nearly double what we paid.

Needless to say we were happy with the profits and would have gladly purchased a reasonable townhouse to accomodate our growing family but no such suitable unit was found after a fairly extensive search.

We are now renting a larger condo in a brand new smaller building and we enjoy our location close to work and amenities. Our cost of renting this unit is half the cost of purchasing on a monthly basis and we are socking away our savings for an even larger down payment once we find a suitable home at a reasonable price. This extra monthly savings combined with the earnings from our extracted home equity is very substantial by any account and make these renters quite satisfied with our lowly renting status!

Now I find myself at Vancouver Housing Bubble Ground Zero

The building we live in has 32 units and currently 20 of these units are listed on the MLS website. Yes, that is right, no typo - 2/3rds of the units in our building, including the one we rent are for sale at this very moment. My landlord was hoping for quick profits by flipping this condo and realizing no quick sale he franticly sought a renter to help cover his costs while trying to sell the unit. His asking rent was ridiculous but was easily bid down by 25% with some fairly convincing arguments and some stiff competition.

The parking garage is empty and we have watched the poor realtors hold open houses all spring long with no traffic and no bids. Reluctantly the sellers lower their prices by $2000 and $4000 at a time but still no takers. Nobody realizes the game is over yet and there are a declining supply of greater fools to buy mediocre houses at inflated prices.

I am happy with my spectator status. It is going to get real interesting so grab some popcorn and a cold pop!

Ubergeek Post - On Price Changes and Months of Inventory in GVREB

Thanks to mohican’s previous work finding correlations between months of inventory and %changes in GVREB benchmark price, I was inspired to take it to the next step. This post concentrates on mohican’s and my further analysis to attempt to find an even better fit of months of inventory to changes in price and, as you will see, a weak but plausible predictor of future price movements. A word of warning this post is a bit technical and geeky, but not enough so (in my opinion) that it will be difficult to understand.

Optimising a Better Fit

The first step is to expand the previous quarter-over-quarter (QOQ) and month-over-month (MOM) price changes versus months of inventory (MOI) scatter plots to include other time intervals and determine if there are other intervals with higher correlation coefficients than MOM and QOQ. This is simply done by computing “XMOXM” % changes in price, from 1 month to 12 months (YOY), and calculating and graphing the correlation coefficient. When this is done we can find the 4MO4M correlation is strongest, with a coefficient of -0.83, slightly better than the QOQ (3MO3M) coefficient of -0.78. Part of the reason the coefficient is weak is due to the variance in MOI in off season periods (December and January). The correlation can be improved significantly by taking the 3 month moving average of MOI. The resulting correlation coefficients are plotted below:

One can see here that the HOH (6MO6M) % change values have the highest correlation with the 3 month moving average of MOI. Plotting on the scatter plot gives a better idea of how the correlation matches a true linear regression:

Plotting HOH price changes and MOI 3 month MA allows us to “predict” a HOH price change in May of 1.4%±1.8% based upon % price change being dependent upon MOI:

The above analysis gives a slightly more certain result of price movements compared to the QOQ and MOM versus non-averaged MOI linear regressions.

Into the Future

The same method can be further expanded by performing cross correlations on the data. Here we experimented with various MOI moving averages but, as you will see, having an unfiltered MOI produces some neat results. The %XMOXM change in price is cross-correlated with raw MOI. The results are displayed in the contour graph:

One can see that 4MO4M % change is a maxima at an offset of 0 months, as expected. But notice a correlation maxima at -3 months offset at 9MO9M. The cool thing here is that we are effectively finding a correlation of current MOI with 9MO9M price changes 3 months into the future. The graph below better illustrates the relationship:

And versus time:

One can see the relationship is not as strong as the HOH-MOI correlation. However this level of accuracy is approximately the same as the QOQ plot versus MOI. The reason MOI must be raw is that any averaging will intuitively reduce the ability to predict farther into the future. Further work around using seasonal adjustments to produce better fitting is possible but I am neither versed in seasonal adjustment techniques nor do I want to fiddle with the data as it stands too much, no knock against Statscan or NAR implied.

Limitations

We should note a few things about the analysis and data used here:

• Data is taken only from January 2005, well into the current price boom, meaning whatever memes that were driving prices over this period (interest rates, speculative behaviour, supply, etc.) are from the past 3+ years only. It is important to realise that the behaviours and events governing price changes may significantly change if prices start falling, meaning the correlation may become weaker in this case.
• It goes without saying this is merely a curve fitting exercise. There is some certainty that the % change prices, are to some degree, dependent upon MOI but it should not be taken as fact.

Other Tidbits

Interestingly I tried adding an inflation factor to the benchmark price and the data became less correlated. Draw your own conclusions here. mohican did a quick fit to FVREB data and got similar results. Further work could be done examining US markets (using CS HPI) to see how such analayis compares especially after 2 years of falling prices.

Fama and French Speak

Watch this interview with Eugene Fama. http://www.dfacanada.com/library/videos/thinkers_fama/

Watch this interview with Kenneth French.
http://www.dfacanada.com/library/videos/thinkers_french/

Enlightening.

REBGV Area Officially in Bear Mode

Well it is mid May and the real estate market is supposed to be sizzling with sales and what is that sound I hear at your local open house. . . . .




. . . . . . .




- - - crickets chirping - - - -




. . . . . . .




In the formerly red hot Vancouver housing market, the inventory of homes for sale is piling up like empty pizza boxes at a teenage boy's birthday party. The rich immigrants and Albertans are not buying them all, locals can't afford them and the wannabe sellers are having to reduce their prices.

It only took a few months longer than the outlying FVREB area but the inventory of resale homes officially hit 26 weeks or 6 months of inventory this past week (as per Paul B's numbers) and that officially puts the Vancouver housing market into bear mode. Look for further price declines and listen for the cry of the wailing speculator - which sounds a lot like crickets chirping at an open house except louder.



The supply-demand relationships at work here should make price declines a virtual certainty through the summer, fall, and winter of 2008 based on seasonal real estate inventory patterns.

Of course if the seasonal pattern doesn't hold this year we could see a different result.

Mortgage / Housing Trends in Canada

I read the Spring report from the Canadian Association of Mortgage Professionals last night and I have a few comments to come later.

Here is the report on the www.caamp.org website.

What pops out at you?

Tsunamis - VHB Makes an Encore Appearance

How do tsunamis work?

This first image does a good job illustrating how a real tsunami works. Watch out on shore when that tsunami hits. It is a dangerous place to be.


This second image does a good job illustrating how a condo tsunami might work. Thanks VHB. It shows the massive amount of condos under construction in the Vancouver area. One could call it a tsunami of condos. Watch out when it lands on shore when these condos start completing. It could be very dangerous.

Note: this chart does not include the additional 5,000 units that have been started since September 2007.


'Nuff said. Have a great weekend.
mohican out.

CMHC Data - VHB makes an appearance

The VHB sent me some really interesting data this morning and I've spliced into my own data collection for our enjoyment.

Here we have the CMHC housing market data from 1948 until present. This includes starts, completions and units under construction. As you can see we are in completely unprecedented territory for the number of units under construction. Local builders really have no idea how much of a supply glut they are creating right now. This will be unfortunate for them but fortunate for me because I'd like to buy a new home at a steep discount. Bring on the supply!



As you can see from this second chart, population growth hasn't been the driver for this new construction and if we had more recent population data we would also see this trend continuing of a low ratio of starts to new persons. This will inevitably cause a supply glut and prices will fall. Builders are continuing to build because people are still buying the units they are putting onto the market.

The problem is that many of these people are either:
1) Speculators who plan to flip for profit - good luck with that
2) Wanna-be landlords who are going to bleed a tremendous amount of cash to hold on to their 'investment' and who will eventually sell because they can't afford to subsidize their renters, like me, for very long.

You can easily see that this is an unsustainable situation. Eventually the carrying costs of an average property must be equal to or less than the income from rent.

Thanks VHB. You give energy to this tired blogger.

Fraser Valley Real Estate - April 2008 Analysis

Warning: Obligatory toot-toot press release:

(Surrey, BC) – An increase in choice continues to be the real estate story in the Fraser Valley, with the Fraser Valley Real Estate Board receiving a record number of new listings on the Multiple Listing Service (MLS®) in April.

The Fraser Valley Real Estate Board received 4,458 new listings last month compared to 2,922 new listings received during April of last year, an increase of 53 per cent. That swell of new inventory took the number of active listings to almost-record highs, reaching 11,111, an increase of 43 per cent compared to the 7,764 listings available during April 2007.

Even with the surge in listings, April sales remained strong at 1,787 total units sold, on par with the 1,781 sales sold in April of 2007. Kelvin Neufeld, the president of the Board says the last time Fraser Valley buyers had so much to choose from, was in the spring of 1994.

The price of a single-family house in the Fraser Valley averaged $547,590, representing a 4.7 per cent increase from April 2007. Townhomes went for an average $344,659 in April, an increase of 7.5 per cent compared to the same month last year when they averaged $320,702.
Average apartment prices in the Valley continued to rise in the double digits increasing by 10.3 per cent compared to last year. They averaged $213,901 in April 2007, compared to $235,840 last month.

Sheesh - look at all those listings. The real surprise this month was the strength of the sales numbers. With strong sales like last month the market is proving that a fool is easily parted with his money - a greater fool that is.

Median price gains are slowing down.

Year over year price gains in the house price index are slowing way down too. I am looking to August for negative year over year numbers.

The strong correlation between the Months of Inventory level and price changes is very strong. We had 6.2 months of inventory in April and because of exceptionally strong sales prices did not decrease.

Greater Vancouver Real Estate Analysis - April 2008

Good afternoon,

The Real Estate Board of Greater Vancouver released the data pertaining to the local market for the month of April with the obligatory 'toot - toot' and press release printed in the local rags. Here is the press release:

VANCOUVER -- Sales edged down and new listings took another big jump during April in Greater Vancouver's real estate markets, although so-called benchmark prices remain higher than they did a year ago, according to real estate board figures.

The Real Estate Board of Greater Vancouver reported 3,218 sales through the Multiple Listings Service, a five-per-cent decline from the same month a year ago. New listings added to inventory were up almost 26 per cent to 7,010, although board president Dave Watt, in a news release, said homes, on average, took six fewer days to sell than in April of last year. "Residential sales continue to be strong, but there is a lot more choice on the market today," Watt added.

The benchmark price of what is considered to be a typical detached home on the board's housing price index was $771,321, up 11 per cent from April a year ago. For townhouses, the $477,900 benchmark price was up 1.05 per cent from a year ago. For condominiums, the benchmark was $389,070, up 9.6 per cent a year ago but down slightly from the previous month.

Average prices for detached homes and apartments, however, were both down from the previous month. In April, the average detached home across the region was $880,844 in April compared with $919,593 in March. The April average for townhouse prices was $509,809, down slightly from $510,428 in March.

This release in indicative of a 'balanced market' very similar to last month although many signs point to big moves ahead of the negative price action variety. With the current rate of increase in the active inventory and the lower level of sales it is only a matter of time before sellers cut prices to attract buyers.

Here are the visuals.

Guesstimates

The local real estate boards will be out with the monthly numbers tomorrow and I am guessing we will have price declines across the board. The inventory level is reaching super-bearish levels in the outer areas and bearish levels closer in. These levels of inventory are so high that it is unavoidable to have price decreases as sellers compete for buyers.

What are your guesses at the numbers?

Mohican thinks:
REBGV - down -1.5% MOM
FVREB - down - 2.0% MOM

Oh - - - if only I could short Vancouver real estate.