Wednesday, April 26, 2017

Vancouver Teranet HPI and Inventory update

Long-time readers of this blog will be familiar with the model that mohican devised that relates house price index (HPI) changes to the ratio of for-sale inventory to monthly sales (months of inventory or MOI). Below is an update to this data series with some brief analysis.

The first graph plots the time series of the 6 month change in the Teranet Vancouver HPI and REBGV MOI. The correlation is clear from direct observation.

The second graph is a scatterplot of HPI change versus months of inventory, with a time shift to optimise for highest correlation.

And finally the same scatterplot but with year-on-year HPI change with a 6 month lag.

The only likely way to get higher MOI is to have higher inventory, and the advent of higher inventory takes many quarters to materialise (inventory is currently very low). It is for this reason that I do not foresee any significant house price relief in Vancouver in the next year to 18 months.

Wednesday, April 05, 2017

REBGV Sales Update Through March 2017

REBGV released their stats package through March 2017. Here are the numbers:

Sales have recovered and are now "average", but nowhere near the levels seen in 2016. Inventory is low and new listings have been low, albeit new listings have recovered in recent weeks. The result is a "lowish" MOI (months of inventory), which portends a decent spring in terms of price growth (not crazy but not weak either). A long stretch of robust new listings is required to allow low inventory to recover.

Why are new listings so low? There are two reasons I think are both acting to suppress listings. First (pointed out to me by Aaron Vaillancourt) many listings manifest due to homeowners moving properties; if there are few listings then there is nothing for homeowners to buy and they will therefore not list. This is somewhat analogous to a "liquidity crisis", and the solution is to lubricate the market with more supply (which is coming later this year). 

Second with higher inventory levels the number of properties that do not clear in a given sales season are higher. Some of these properties will be listed the next season. In 2015 and 2016 the high level of sales has meant most of this inventory has cleared, pushing resultant re-listings are down.

Attached housing (townhouse and apartments) continues to be stronger than single detached housing in terms of price strength as measured by the change in the MLS-HPI (see link at beginning of this post). This closing of the gap between housing types is to be expected in the wake of detached housing prices having had accelerated in previous years.

I continue to see no evidence to suggest a significant slowdown will occur in 2017. That is not to say a significant slowdown won't occur, but I don't see any evidence supporting it.