. . . . . . .
- - - crickets chirping - - - -
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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.
29 comments:
Mo,
That scatter chart/regression plot is the single best innovation in the vancouver bubblesphere. I really like it.
Bulls are all like 'see, there hasn't been a 50% crash yet so you bears are wrong.' Your graph gives me comfort by letting me know pretty much exactly *when* I should start seeing price declines.
Thanks VHB,
Credit goes to radley over at the calgary blog for convincing me to change my linear chart of the same data to a scatter plot. I knew the relationship was there but I wasn't displaying it very well before and the scatter plot communicates so much more.
This stuff isn't 'rocket science' but man people sure are emotionally invested. This is what makes it so interesting and I suppose it is why I have a job! If we were talking about the supply / demand of widgets, people wouldn't be so emotionally charged even though the data could be exactly the same.
mo, agree the chart is great. Is it possible to get the raw data?
Please tell me how to read the scatter chart. It looks pretty,but I can't figure out what it means...
I'd be interested in seeing the equation and the R-squared values for those lines. And maybe for the benefit of the non-technical public, perhaps you could interpret it as, "for every 1.5 months gain in MOI, we can see an additional -1% MOM change in price... "
Realtor Hypocracy in Coquitlam Caught on Camera
Anecdotally, during my morning half-mile stroll through SE Maple Ridge I have seen the number of for sales signs rise from 8 to 15 since the start of March. During that time one sign now shows sold (it was new and unoccupied since August last year) and and 8 new for sale signs have gone up.
I should add my stroll is only 5 minutes long (about five blocks).
Lets not lose sight of the fact that it looks like it is finally actually freaking happening. The markets are seeing reason. It looks like there are no more rabbits left. We've added 2000 inventory in 2 weeks. The insanity is about to end. This long in the tooth boom is about to get its teeth pulled.
Many thanks to VHB and Mohican for providing data to understand whether it was me or the markets that were stupid. You guys rock.
jason, the simplest interpretation of this graph is that once months of inventory exceeds 5.5-6.0 there are month-over-month and quarter-over-quarter price drops.
Great stuff.
As inventory grows, adding downside pressure to asking prices, the MOI will rise breaking the multi year highs, moving into new high territory. Future advances upwards should now become much more easily achieved. The MO on the camel's back is almost broken.
When this happens downward price pressure becomes very heavy and will eventually crack to the downside.
Remember, this is still a slow process. For example. a 6% annual downward move is only about 0.5% per month. Only people following this closely are the most likely to pick up on this.
Great work Mohican! I am shocked at the pull back in sales we are seeing. This could be a rapid turn.
What I don't get is why, with the market slowing, people were already camped out yesterday evening at Jewel in Burnaby (http://www.jewelhomes.ca/). I don't know when they open, but the line was still there this morning at 9am.
Bizarre.
torpesco, not everyone reads blogs. Consider yourself lucky to have insider information if you like! Did you see me on the corner?
Just email me if you want the raw data and I'll get it to you.
All the data was compiled from the FVREB, REBGV, and thanks to Paul who generously shared some of his data with me.
Things are looking crashtastic!
I'm going out this weekend to have some fun -- see y'all later.
All I can say, is it is about freaking time. This insanity went on far too long. I had hoped this would start to unravel long before we went into recession.
Just a month ago my wife noted that every single last one of our friends had finally become homedebtors and we were the last ones still renting. At least a third became owners in the last year alone, and they bought more out of exasperation than anything else. I think the downturn will be a difficult psychological hit for these people - they lost on the upside, and now they lose on the downside. I've been there with stocks...it really sucks buying near the top.
Bobbybear said:
Remember, this is still a slow process. For example. a 6% annual downward move is only about 0.5% per month. Only people following this closely are the most likely to pick up on this.
10:24 AM, May 16, 2008
I think those that buy now with the intent to cash out quickly with a big profit will notice much sooner. I know people like this. It makes my eyes roll when they talk. And then I'll just sell for a 10 % profit because they say RE going up that much in the next year...ugh. How long will they wait for the market to turn up again? I don't think the listings have even started yet!
Aside, I've got friends in Pr George and Ft st. John...they say the market has died.
Thank-you to Mohican and Paul B.
The data keeps my spirits up.
Vancouver the best place on earth
Olympics
Lowest interest in a century
Lowest unemployment rate in ½ century
Longest Aromatization in history
Mountains
Ocean
Rich immigrants
Ran out of land in the mid 70’s
Rennie, Bill, Helmut, Muir pimping and pumping with full vigor, and still the listings pile up
TICK TOCK, TICK TOCK
On the other hand during 1980-82, approximately 2 years if you will, the downward move was higher at about 2% per month.
We are going to fall faster than Calgary/Edmonton (they had lower prices, much stronger economy).
Both are down > 10% from the top last summer, i.e. in less than a year.
The BC economy is a house of cards based on RE and consumer indebtedness, just like the US bubble states.
I think once we're over the top (and may be already) we'll see at least 15% annual declines.
Great work Mohican! I am shocked at the pull back in sales we are seeing. This could be a rapid turn.
Yes. We've had inventory run ups before (though not on this scale), but the drop in sales is indicative of something big, and very unlikely to reverse.
"Longest Aromatization in history"
Something does stink about this whole mess.
Mohican, if I could make a suggestion for your QOQ vs. Inventory graph, could you add a third dimension of time somewhere?
Thanks. I really enjoy your blog.
Anyone else think that as this thing gets rolling, the "bailout" crowd will be much better organized and come to the forefront much more quickly than the one in the US?
I have heard that CHMC doesn't have to hold much capital in reserve for defaults because for them, the taxpayer bailout is automatic.
In the US, it seems the will is very much there to throw savers under a bus in order to reward the speculators, but the logistics of putting together a bailout package (in a timely manner) are crushing any efforts.
Will the CMHC have carte blanche (sp?) to throw as much new credit at the drowning as is necessary to slow or stop the fall?
If CMHC became insolvent it would become a major debacle for the government.
Don't ever forget - the megabubble is only in BC, the Alberta bubble is already deflating, Toronto is overpriced but nothing like the West.
In other words an attempt to keep the party going would be seen in the rest of Canada (most particularly Quebec) as picking their pockets.
With a shaky minority government? Not going to happen.
In other words an attempt to keep the party going would be seen in the rest of Canada (most particularly Quebec) as picking their pockets.
With a shaky minority government? Not going to happen.
Well said Patriotz, and remember BC has negligible influence in Federal politics, the rest of the country will leave our home debtors twisting in the wind along with the rest of our economy. For evidence see the fed attitude toward the BC forest industry over the last few decades.
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