Wednesday, September 05, 2012

Greater Vancouver Market Snapshot August 2012

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to August 2012. (see REBGV news releases.)
The scatterplot of price changes and months of inventory is now being regularly updated:


August 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). August sales are the second lowest in the past decade, though close to levels seen in 2008.

This August 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 recurring 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 in the form of changes to government-underwritten mortgage insurance qualification criteria and second, to commence very soon, 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 looks likely 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, but in my view temporary, bout of current account flows into Vancouver-area property investments.

Three quick notes. First is that another good measure of relative market strength and weakness is the "sell to newlist" ratio, or the ratio of sales to new listings over a given interval. This measure is similar to months of inventory and provides an indication how fast properties are being tendered relative to them being sold. A higher sell-newlist ratio is bullish for prices, a lower sell-newlist ratio is bearish for prices. Vancouver Housing Blogger presented sell-newlist data here at the beginning of this year. The sell-newlist for 2012 has been below the average level for the past 10 years and prices have been relatively weak.

Second there are pockets of relative strength and weakness in the Vancouver area. Richmond, Vancouver West, and West Vancouver detached sales have markedly slowed for most of the year and prices are beginning to come off their highs. Other areas such as Vancouver East and Coquitlam have been relatively strong. This post deals with aggregate sales without delving into sub regions or housing types so please read the press release or talk to your local real estate busybodies to get a feel for "what's up".

Third I put together a slideshow on some housing market mechanics basics using Vancouver data. I'll be producing a few more over the next while geared towards different audiences. The goal is to provide a summary of the pertinent analysis mohican, VHB, and other local bloggers have done on Vancouver's market. This one is geared more for someone who has a bit of finance background.

In aggregate, yet another weak report for resale housing activity in the Vancouver area.

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