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. I would not be surprised to see the Teranet HPI down between -6% and -4% year-on-year by February or March of 2013.
Commentary:
January sales 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). January sales are near lows in at least the past decade, though above levels seen in 2009.
To partially compensate for weekend framing effects I have plotted sales per working day on a month-by-month basis.
This January saw another weak report. Sales for the year are bad and this has direct effects on incomes of those who depend on resale turnover for income.
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, though it looks like growth is set to resume some entering 2013; for how long this growth can continue is uncertain.
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). That stated, longer-term 5-year-term loan rates may have some room to move up in the coming year as the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.
Asian economies are currently meting out another round of investment spending through coordinated government stimulus measures -- and 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. Investment trends in China are difficult to ascertain; some analysts and academics like Michael Pettis are pointing to some worrying signs in the coming years regarding hard commodity demand and investment growth there. If that analysis proves correct, that would have a direct and negative impact on Vancouver-bound remittances and externally-generated-capital-based residential investment.
My estimates for February are for inventory of 14335 and sales of 1891 based on estimating average changes from January of years 2005-2012.
To partially compensate for weekend framing effects I have plotted sales per working day on a month-by-month basis.
This January saw another weak report. Sales for the year are bad and this has direct effects on incomes of those who depend on resale turnover for income.
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). That stated, longer-term 5-year-term loan rates may have some room to move up in the coming year as the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.
Asian economies are currently meting out another round of investment spending through coordinated government stimulus measures -- and 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. Investment trends in China are difficult to ascertain; some analysts and academics like Michael Pettis are pointing to some worrying signs in the coming years regarding hard commodity demand and investment growth there. If that analysis proves correct, that would have a direct and negative impact on Vancouver-bound remittances and externally-generated-capital-based residential investment.
My estimates for February are for inventory of 14335 and sales of 1891 based on estimating average changes from January of years 2005-2012.
1 comment:
Fantastic analysis as always. Thank you for doing original and meaningful research for our benefit. I believe in market reflexivity and I want more Canadians and Vancouverites to read your blog.
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