Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to December 2011.
And the detached benchmark price:
Commentary: December 2011 saw rather weak sales volumes; in some years weakness in December is attributed to snowy conditions; not so this year with only trace amounts of snow for the entire month. Months of inventory (MOI, the number of months it would take to clear month-end inventory at current monthly sales levels), a key indicator of market liquidity and impending price strength, is at about 6, a level concomitant with flat prices.
Total inventory usually declines through the month as Realtors typically take vacations around this time and homeowners wanting, but were unable to, sell retrench for the more robust spring selling season. This year we have already started adding listings, I speculate due to those who are eager to sell sooner rather than later.
Below is the predictor of price gains, based on half-over-half price change to months of inventory correlation, and below that the scatter plot showing the raw actual data:
What this shows is the change in prices in a month from 6 months ago based on actual data and “predicting” the price based on months of inventory from that month based on linear regression of half-over-half price change to months of inventory (with 3 month moving average).
December 2011 was weaker than past years in terms of sales, however inventory declined as it does every year and was not inflated as it was at the finish of 2008. There will nonetheless be a historically average base of listings going into January. Due to several factors -- higher prices, relatively subdued population growth, tightened credit conditions, and a predicted increase in dwelling completions -- I expect the first few months of 2012 to see lower sales volumes and higher listings than 2011. I do think benchmark prices will increase from current levels through the first half of 2012. If inventory continues to increase and sales remain subdued, however, I anticipate the price increases will be transitory.
6 comments:
I like the work you do but the graphs are hard to read because of the transparency. Like what line is 2012? The orange one? or is that 2007.
2012 doesn't appear yet because we don't have data from it yet. I can rejig the graphs; they are embedded in googledocs so any change I make will appear upon re-rendering.
I put up a couple of options spread between the 3 graphs, one with shading, the other without. Let me know which one you prefer. I'm sure I'll get complaints either way ;)
One concerning observation, as I noted a few months ago, is that the MOI to price change correlation "gain" has been increased post 2008. This I surmised was due to lower interest rates producing an environment where price changes are more volatile. (Some convexity thingy.)
If MOI exhibits elevated levels in 2012 price drops seem slated to be more severe than the model predicts.
doh! your right; my bad. I didn't even think about the number when I typed it. :P
I think my concern was the blending of colors on the second graph however theres a solid line so this isn't actually an issue.
I'm actually personally suprised we're getting volatility in the housing market right now. I would have felt next year would have been smooth until there were to be trouble in the commodity market.
I wish we could have overbuilt/stagnated more for the pop to be more spectacular.
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