Thursday, June 25, 2009
Greater Vancouver - Inflation Adjusted House Price Index
As promised a few days back, I've put together a chart which shows quarterly Greater Vancouver benchmarked detached House Prices from 1976 to present. I have also added a simple linear trendline to the chart and the year over year change in real prices.
I really think that we have not seen the end of price decreases yet since this would be the smallest correction on record after the biggest boom on record - that would be unusual.
What do you think?
PS - I'm going away for a bit of a break so jesse and other will hold down the fort for the time being. Warm regards.
Wednesday, June 24, 2009
Teranet House Price Index for April 2009
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Of the six constituent city indices, three were down from a year earlier: Vancouver (−10.9%), Calgary (−9.8%) and Toronto (−7.6%). Three cities held out against 12-month deflation, though with marked deceleration of their 12-month rises: Montreal (2.4%), Ottawa (0.6%) and Halifax (0.2%). The 12-month price increase in Halifax was the first since January. Calgary prices have been correcting for well over a year now, since August 2007, and are now down 13.3% from the peak of that month. Calgary has shown monthly declines in 17 of the 20 months posted since then, including the 10 consecutive months from last July through April. Vancouver prices have also shown 10 straight monthly declines and are down 11.9% from peak. Toronto prices have declined eight months in a row and are 11.3% below peak. In Ottawa the downtrend is less pronounced: prices have declined in each of the six months since the October peak and are now down a cumulative 4.8%. Halifax and Montreal prices were up from the previous month in both March and April and are now only 1.7% and 1.4% below their respective peaks. Teranet – National Bank House Price Index™The historical data of the Teranet – National Bank House Price Index™ is available at www.housepriceindex.ca.
The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given at www.housepriceindex.ca
Teranet - National Bank House Price Index™ thanks the author for their special collaboration on this report. 1 Value of Dwelling for the Owner-occupied Non-farm, Non-reserve Private Dwellings of Canada. |
Friday, June 19, 2009
Inflation and House Prices
The correlation between the two series is 0.18 - not strong, but positive. I think we need more data than 15 years to prove conclusively that there is a link between inflation and house prices. The fact of the matter is that inflation has been relatively low for a very long period of time and interest rates have fallen dramatically during this low inflation period. We don't really know what much higher inflation will do to real estate values of the short / medium term but we do know that real estate is a very interest rate sensitive asset since most people use borrowed money to buy real estate. If I look back at high inflation periods in the past (the 70s), house prices were a much smaller multiple of personal incomes than they are today and rates were also much higher than they are today which would indicate that affordability is a combination of the interest rate and the price - duh!
If we expect inflation then we should also expect much higher interest rates eventually to bring the inflation down and this would deflate house prices as current house prices with a 10% or 15% mortgage rate would be out of reach for all but the super rich. As we know, the housing market is fundamentally a supply / demand based market and if there is no demand at a given price the price will fall until the price meets someone's ability to pay.
Wednesday, June 17, 2009
500 Posts and Housing Market Indicators
In the vein of thinking about the direction of the housing market, I stumbled across some data that I've had sitting on my computer for some time that I found quite interesting but have never posted for some reason. The data comes from http://www.macromarkets.com/ - who started and continue to operate the housing market futures trading on the CME.
So, let's talk about what these indicators mean to us in Vancouver. If we start with the premise that there should be no significant differences between the correlations in US markets and Vancouver, we can use the correlation data above to make some informed observations about the local market and perhaps on the future direction of the market. I think this is a fair assumption given that it makes reasonable sense to see correlations between housing starts, construction spending, unemployment and house prices.
For the record:
- Construction spending is way down in Vancouver at the moment.
- Housing supply is elevated but much lower than last year.
- Mortgage applications are not tracked officially on a local level but anecdotally they are up from last year.
- Housing starts are way down from last year.
- Building permits are also way down.
- New home sales are low but higher than last year.
- Median rent is high in Vancouver compared to other Canadian cities.
- Personal income is falling right now.
- The unemployment rate is rising.
Now what do you think?
Wednesday, June 10, 2009
Ask Dr. Housing Analysis
I keep hearing comments on blogs and amongst friends and family about how the buy-vs-rent equation has decidedly shifted to the buy side, given one's propensity to own instead of rent, so if the math works why not buy now? In some jurisdictions the tax laws favour owning biasing the calculation further, from a buyer's point of view.
So instead of lecturing on my views, I thought I'd present a real-life case from someone I know, inspired by Fish10 and, for wily veterans of the Vancouver housing blog scene, the old "Ask VHB" posts of yore.
For a change this person is not in the Vancouver area. Please feel free to analyse the situation in the comments. I'll post the "correct" answer in a few days. You will be marked on your analytical ability; this is, after all an "analysis" blog so don't suck.
Yo,
Right. There is a tax scheme in Holland such that it is actually cheaper to buy a house on an interest-only scheme than to pay rent. Long story short:
I’ve got the 30% tax relief, so the first 30% of my salary is non-taxable (a benefit for being an expat.) Mortgage interest payments are deductible in full – so would save big time on that if I were paying interest only.
All in all it makes sense IFF [if and only if] the value of the house rises by more than 10% by the time I sell it (because in the purchase fee is approx 10% fees, all borne by the buyer). So I’ve been looking into prices and here in Holland they’ve just started to drop – last month prices dropped across the board.
Here’s the official government statistics site (in English!) with some fun stats.
By looking at this, to me it seems like it might be a good time to start looking, but would appreciate your nerdly view on things too!
Nerdlings, what say you...?
Monday, June 08, 2009
Teranet Data in Graphs
CMHC Housing Starts for Greater Vancouver
Saturday, June 06, 2009
Vancouver Benchmark versus Case Shiller Update
Update
I have run the numbers comparing the Teranet HPI to the benchmark. In the short run, the Vancouver benchmark tracks Miami very well on the above graph, but even more surprising is that Toronto's HPI is falling faster than Vancouver's from peak, though Vancouver has fallen more in % terms. I will post the graphs in a subsequent post. We should not be surprised that the benchmark deviates from the HPI, though from what I have seen in the long run the two will eventually track each other reasonably well. It looks as if the benchmark has "overestimated" price drops but may now be "underestimating" them.
Wednesday, June 03, 2009
Greater Vancouver Real Estate - May 2009
Sales are pretty hot in the Greater Vancouver area. Interest rates have come down enough that it has reduced the prospective monthly payment of a homebuyer by 30%. Combine that improvement in affordability with the price correction witnessed over the past 12 months and I can certainly understand why sales have been brisk.
Active listings have not moved up as much as last year. Sales have taken some inventory out of the market but that doesn't explain the big difference between this year and last year. I suspect that many potential homesellers are waiting until after the 2010 winter olympics with the hope that the games will goose the market upward.
With higher sales and lower listings, months of inventory has fallen dramatically.
House prices have moved up handily in the past three months as buyer competition has been the norm with a low MOI.
The correlation between MOI and price changes is very high and as expected, last month was no exception with a low MOI relating to an increase in prices.