Tuesday, December 04, 2012

Greater Vancouver Market Snapshot November 2012

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to November 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.


November 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). November sales are near lows in at least the past decade, though above levels seen in 2008.

To partially compensate for weekend framing effects I have plotted sales per working day on a month-by-month basis. Using this more accurate gauge we can see that November is weaker than October and about in-line with September:

This November saw 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 the Teranet HPI 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 via changes to government-underwritten mortgage insurance qualification criteria and via implementation of stricter mortgage lending guidelines under OSFI's new directives. (Credit Unions are one notable exception though it appears BC CUs will comply with the brunt of OSFI guidelines.) Further stress in current conditions can be attributed to China's slower 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. several years). It looks likely that Asian economies are currently meting out 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.

Based on taking the average ratios of sales in December to sales in September through November from previous years I am estimating December 2012 sales to be 1159 +/- 34 (one sd). Last month I got lucky and my estimate was only off by 14.

Sigh. Yet another weak report for resale housing activity in the Vancouver area. This is not at all pleasant to type.

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