Vancouver Teranet and Housing Inventory Correlation Update

The past few months have seen a marked cooling in price changes and sales volumes in Metro Vancouver and I just got around to updating some scatterplots that relate the change in the Teranet House Price Index to the ratio of for-sale inventory to monthly sales (months of inventory, or MOI). Here are the updated charts, showing price changes for 3 months (quarter), 6 months (half) and 12 months (year):

An interesting development late last year saw prices drop significantly when compared to the available inventory — the model predicted more price strength in the face of a dearth of available inventory than what actually occurred. Prices have moderated somewhat but are still up 16% year-on-year, an indication perhaps that last spring's buying frenzy was anomalous compared to other years. Perhaps the spike in the spring of 2016 was more of a transient event and was not truly representative of underlying demand.

On the subject of inventory, inventory is very low right now, around 8000 or so for REBGV and inventory growth is nothing short of anaemic. As the market enters the traditionally robust spring selling season the lack of inventory will tend to place upwards pressure on pricing, all else equal.  I see no significant evidence yet to suggest that prices (as measured by the Teranet HPI) are exceptionally weak compared to current MOI, in the context of the historical price-change-to-MOI correlation. That stated, with inventory this low, the market may be operating in a different state compared to most past years.