Friday, November 02, 2012

Greater Vancouver Market Snapshot October 2012

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to October 2012. (see REBGV news releases.)

The scatterplot of price changes and months of inventory is below. As the Teranet data roll in, look for more points appearing the right-hand side.


October 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). October sales are near lows in at least the past decade, though close to levels seen in 2008.

Due to weekend framing effects the rebound on the sales graph above is overstated. To partially compensate for this I have plotted sales per working day on a month-by-month basis. Using this more accurate gauge we can see that relative strength in October is muted:

This October 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. I would not be surprised to see prices down between -6% and -4% year-on-year by February or March of 2013.

As a recurring reminder, there are some worrying clouds on the horizon: population growth is falling, dwelling completions are set to increase over the next year if not longer, and banks have implemented stricter mortgage guidelines in the form of changes to government-underwritten mortgage insurance qualification criteria and second, completely as of November 1st, via implementation of stricter mortgage lending guidelines under OSFI's new directives. (Credit Unions are one notable exception.) 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.

While October sales per day were about 9.6% higher than September's, some perspective is required: sales levels are still well below the average of the past decade. All else equal I expect November sales to track October's level, perhaps slightly weaker but not markedly so. I estimate total sales for November to come in at about 1700.

Yet another weak report for resale housing activity in the Vancouver area.

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