Commentary:
July continued with relative weakness compared to not only 2011 but also past years from 2005 (except the residual emerging from the recession of 2008-2009). July sales are the lowest since the early part of the turn of the century, though close to levels seen in 2008.
This July was another weak report. Sales year-to-date are bad and this has direct effects on incomes of those who depend on resale turnover for income. This level of sales, if they continue to be weak, is going to translate into higher months of inventory for the rest of the year (MOI is typically higher in the latter half of the year; an MOI of around 6 normally translates to flat prices) and concomitant price drops already starting to rear their heads in the posted MLS benchmark prices and medians. Prices (as measured by the Teranet HPI) will likely be year-on-year negative by the end of the summer.
As a consistent (bordering on boilerplate) reminder, there are some worrying clouds on the horizon: population growth is falling, dwelling completions are set to increase in the latter half of the year, and banks are beginning to implement stricter mortgage guidelines implemented last month in the form of changes to government-underwritten mortgage insurance qualification criteria and second, to commence over the coming quarters, via implementation of stricter mortgage lending guidelines under OSFI's new directives. Further stress in current conditions can be attributed to China's slowing economic growth. On the other hand mortgage rates remain low, near net zero real territory, and it is possible for rates to remain low for a prolonged period (i.e. years). It is possible that Asian economies are due for another round of investment spending through coordinated government stimulus measures -- not only in Asia but also in other jurisdictions -- and that can plausibly lead to a renewed bout of current account flows into Vancouver-area property investments.
Ben Rabidoux over at theeconomicanalyst (@BenRabidoux) has produced the following graph outlining year-over-year change in average resale house price in Vancouver to June 2012. July has continued with double-digit YOY price changes. Something to think about.
Yet another weak report for resale housing activity in the Vancouver area.
This July was another weak report. Sales year-to-date are bad and this has direct effects on incomes of those who depend on resale turnover for income. This level of sales, if they continue to be weak, is going to translate into higher months of inventory for the rest of the year (MOI is typically higher in the latter half of the year; an MOI of around 6 normally translates to flat prices) and concomitant price drops already starting to rear their heads in the posted MLS benchmark prices and medians. Prices (as measured by the Teranet HPI) will likely be year-on-year negative by the end of the summer.
Ben Rabidoux over at theeconomicanalyst (@BenRabidoux) has produced the following graph outlining year-over-year change in average resale house price in Vancouver to June 2012. July has continued with double-digit YOY price changes. Something to think about.
Yet another weak report for resale housing activity in the Vancouver area.
3 comments:
nicely done once again.
I'd bet we test 15 MOI in a couple months~
August is a key month to watch, in my view. If further deterioration in sales occurs that portends poorly for fall sales activity. I am putting the 90% confidence bands to be set at 2008 (lower) and 2010 (upper) for monthly sales for the rest of the year. Who knows though!
(2008/2010 are the years with which to compare sales numbers)
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