Vancouver housing market overview - July 2021

This post presents some graphs that demonstrate the overall status of the Greater Vancouver housing market (specifically REBGV but the basic analysis extends to FVREB as well)

Housing transactions:

There is a dearth of new listings, for whatever reason, and this is likely leading to some additional competition among buyers. Months of inventory remains very low and this is unlikely to lead to a condition where prices will be soft in the fall. Sales remain quite strong. I don't see the current market as soft. Interest rates are low -- I am hearing near 2% for a five year fixed term. This allows a significant amount of monthly principal to be carried. This is almost certainly affecting demand, as is, I am guessing, some additional perceived cash flow due to travel restrictions and such. I don't know for how long such factors will persist. Any predictions are statistical.

Vancouver housing market overview - April 2021

This post presents some graphs that demonstrate the overall status of the Greater Vancouver housing market (specifically REBGV but the basic analysis extends to FVREB as well)

First, housing transactions:

Sales are very strong, but interestingly so too are new listings. This has led to months of inventory being higher than it would be otherwise. There is a fair amount of supply that is available for sale and owners are finding the impetus to have it placed on the market. New listings have been trending above average since late summer of last year (partially making up for lost ground earlier in the year, but they have remained robust.

Second: prices relative to inventory:

Over the past 14 years the relationship that mohican developed has been validated time and time again. It is pretty "obvious" that more supply for sale means relatively lower prices (and conversely less supply for sale means relatively higher prices), but the remarkable aspect is how predictable this is. More supply for sale is the only way price growth can moderate. There are a few ways this can happen, but a significant contributor will be new construction.

Speaking of new supply:

Housing construction activity over the past five years has been sustained and significant. There are significant numbers of units being built and now completing. There is no doubt in my mind these new units are part (though by no means all) of the reason we are seeing new listings trending higher.

Population growth:

International components of population growth have been very low due to travel restrictions. This will not last forever, but has led to significant easing of pressure on the rental market. (Anecdotally there is a lot more choice available and rent rates are not under upwards pressure, for those fortunate enough to be in a position where they aren't discriminated against in our private markets). Natural increase is near zero. Population growth from here on out will be primarily from interprovincial migration (Alberta mostly, and unless their economic underpinnings improve I think we will see movement to Alberta dwindle in the years ahead), and international migration (slated to increase over the coming years). Looking at the paltry and dwindling natural increases fully explains why immigration numbers are being ramped up.

Taking a longer view, Vancouver is going to remain a region increasing in population and it will need housing to accommodate this growth. This will mean significant pressures on infill in existing lands, and this invariably manifests as speculation. Lower density properties (i.e. single detached homes) are only becoming more scarce but are still coveted for lifestyle and status reasons. I do not see this pressure abating anytime soon, and I can assure you we don't need offshore money to lock this in.

Anyways, get vaccinated. If BC doesn't get sufficiently vaccinated, life is going to be very hard for a lot of people.

On the mechanics of CMHC construction data

A quick note on the mechanics of CMHC construction data. CMHC reports three main datapoints in its Table 027-0048 Canada Mortgage and Housing Corporation, housing starts, under construction and completions in selected census metropolitan areas monthly (units): starts, completions, and under construction.

Definitions are as follows (link):

Start: For purposes of the Starts and Completions Survey, a Start is defined as the beginning of construction work on a building, usually when the concrete has been poured for the whole of the footing around the structure, or an equivalent stage where a basement will not be part of the structure.

Under Construction refers to the number of units under construction at the end of the period shown, and takes into account certain adjustments which are necessary for various reasons. For example, after a start on a dwelling has commenced construction may cease, or a structure, when completed, may contain more or fewer dwelling units than were reported at start.

A Completion is defined as the stage at which all the proposed construction work on a dwelling unit has been performed, although under some circumstances a dwelling may be counted as completed where up to 10 per cent of the proposed work remains to be done.

The graphs I show on construction activity were authored by Vancouver Housing Blogger (the blog is now almost 10 years defunct). Since there is seasonality in starts and completions, a seasonal adjustment has been performed by summing a year's worth of starts and completions, therefore the starts and completions data are filtered with a delay of 6 months. Sudden changes in starts and completions will be "averaged" so could take some time to show up. (Smarter ways of seasonally adjusting are available but whatever.)

One behaviour worthy of note is that under construction is the cumulative difference between starts and completions. If starts outpace completions, under construction rises. If completions outpace starts, under construction falls. Here is where we are today:

Starts have outpaced completions since the end of the last recession. More recently starts went plaid and under construction has gone off the charts (literally, in the case above). Since the construction process has a fair amount of fixed resources (engineering, labour, materials, inspections, etc.), this sudden surge in activity has resulted in completions lagging moreso than they have in the past (i.e. projects have been delayed), and units under construction has ballooned as starts, until just recently, have continued apace.

As the construction backlog clears, completions will increase as resources become freed up to be transferred to other projects. As completions increase, units under construction should begin to drop, but only if starts do not continue in beast mode.

Regardless, supply is coming very soon.

Vancouver CMA housing construction activity --- Moar!

Moar housing is on the way:

City of Vancouver Permit Update: Moar Supply!

A brief update on the City of Vancouver permit data, available here, with the use of charts.

All dwellings and their value, 12 month sum. Construction activity has been on a very steady and increasing pace since the end of the 2009 recession.

Multi units (not including single detached, duplex or laneway)

Single detached and duplexes; I have considered legal suites to be a dwelling (such as it is).

Laneways continue to be the belle of the ball.

And how about demolitions? Well yes.

In summary, moar supply!

Bifurcation of the BC Real Estate Market

No, bifurcation isn't a an intestinal disorder although it could cause some consternation (not constipation) among some observers who expect uniform behaviour across various real estate markets.

Based on market behaviour since the 'flash crash' of 2008/2009, we could draw a clear line between the urban market of Greater Vancouver and the rest of the province. The City of Vancouver and its immediate suburbs have witnessed a frenetic pace of home buying activity and consequent price rises.

This is in a pretty marked contrast to the real estate markets of the Fraser Valley, Vancouver Island, and the rest of BC. While prices have risen substantially in the area covered by the REBGV this past year, they have fallen or remained relatively flat in many markets including the Fraser Valley, Chilliwack, Okanagan, Northern Interior, etc. thus bifurcation.

Why?

Quite simply, I think it just comes down to supply and demand. The Greater Vancouver real estate market has inelastic supply and demand that is relatively stable. When the market is hot, supply becomes even more constrained as holders of real estate hang on for further gains rather than listing. Demand is increased as potential buyers feel like they are 'getting left behind' and the ratios of supply and demand drive prices higher. This, of course, can work in reverse, which is what we witnessed during the 'flash crash' of 2008/2009 and I expect we will witness a rather severe and perhaps more prolonged version again soon.

What do you think? When might this happen?

Note: The Landcor 2010 Report paints the same picture: https://www.landcor.com/market/reports/2010_Residential_Sales_Summary.pdf

FVREB August 2010 Statistics

The FVREB releases stats today. Here they are.

A notable note is that the price of the residential benchmark is down -0.3% from August 2007.

Flat prices for 3 years is starting to take the wind out of the sails of the relentless pumpers. The psychology is changing and the fall should be interesting.

Charts to come later.

Bank of Canada Paper on Housing Stock

Title	A Model of Housing Stock for Canada
Author	David Dupuis and Yi Zheng
Type	Working Paper 2010-19
Date of publication	July 2010
Language	English
Abstract	Using an error-correction model (ECM) framework, the authors attempt to quantify the degree of disequilibrium in Canadian housing stock over the period 1961–2008 for the national aggregate and over 1981–2008 for the provinces. They find that, based on quarterly data, the level of housing stock in the long run is associated with population, real per capita disposable income, and real house prices. Population growth (net migration, particularly for the western provinces) is also an important determinant of the short-run dynamics of housing stock, after controlling for serial correlation in the dependent variable. Real mortgage rates, consumer confidence, and a number of other variables identified in the literature are found to play a small role in the short run. The authors’ model suggests that the Canadian housing stock was 2 per cent above its equilibrium level at the end of 2008. There was likely overbuilding, to varying degrees, in Saskatchewan, New Brunswick, British Columbia, Ontario, and Quebec.
Bank topic index	Domestic demand and components
JEL classification	E21, J00

You may download the paper in the following format(s):

• Acrobat (.pdf, 294 kb)

Fraser Valley Real Estate - April 2010

Here are the charts:

Active listings are increasing at the same pace as 2008.


Sales are still brisk but May could mark a turning point as it did in 2008.


Months of inventory is at the high side of normal and looks to be matching 2008. It will take a drop in sales to get to the extremely elevated levels of market distress we saw in 2008.



Correlation between MOI and price changes is extremely robust and we should be looking for price decreases through the summer if normal seasonal patterns hold up.

Ubergeek Post Update December 2009 - Price Changes and Months of Inventory in GVREB

Here is a quick update on the work mohican and I did in spring 2008 around refining mohican's work tracking price changes and months of inventory. Remember that the best fit was to track half-over-half (i.e. 6 months over 6 months) price changes to a three month moving average of months of inventory (total active listings at the end of the month divided by the sales in that month).

Here is mohican's scatter plot for half-over-half versus 3 month moving average MOI, updated inclusive December 2009 data:



The correlation still exists, and another small step closer to the designation of "law". We can see how well the model has behaved.



Months of inventory was extremely low through the second half of 2009, an odd event in history when unemployment is rising. There was a step-change in affordability due to low mortgage rates, coupled with a lack of tightened requirements for loan qualifications. Are there other plausible reasons for low inventory and high sales? Last year's about-face happened across Canada but unique local factors still play a role.

What will 2010 bring for BC housing? There are several portents.

- There are musings on the wind of tightening mortgage requirements which will have some impact on demand.
- Interest rates are predicted to rise the second half of this year. We'll see. Low interest rates will reduce the chances of a price collapse but will not prevent prices from falling.
- Rental demand looks to remain weak. With the Olympics finishing in 45 days or so we may see some extra rental supply and, perhaps, extra for-sale supply as well.
- Unemployment is unlikely to decrease through 2010. Government budgets, at all three levels, are under stress. The pool of money grows increasingly thin, as one would expect as the world continues to de-leverage, though the process appears to be a drawn-out affair.

REBGV October 2009 Charts

Here are the updated charts for the Real Estate Board of Greater Vancouver area.

Vancouver CMA CMHC Data for August 2009

CMHC released housing market data for the month of August 2009 and here is the data for the Vancouver area.

927 Starts
18,992 Under Construction
1,227 Completions

July 2009 Vancouver CMA CMHC Stats

Here is what CMHC has to say:

Housing starts continued to trend lower in July. Foundations were poured for 517 new homes, down 73 per cent from July 2008. The majority of new housing projects were in Surrey and Vancouver City, and these were mostly single detached homes.


During the first seven months of the year, a total of 3,859 homes were started in the Vancouver census metropolitan area (CMA) compared to some 12,082 units for the same period last year.


Single-detached home starts have been trending up since the beginning of the year, and accounted for almost half of the new developments in July. Multiple-family units normally accounted for the larger share of total housing starts inVancouver.


Multiple-unit projects, on the other hand, continued to retreat. Developers have been taking a wait and see approach towards the multi-unit market even though the number of units absorbed has begun to trend upward and narrow the gap vis-à-vis last year's figures. There are still numerous projects under construction and a sound inventory of unsold new homes available. Homebuilding will remain modest until more of the inventory of new and existing homes is sold off.

Here is the data:

There were 517 housing starts. 236 of those starts were single family homes. 96 of those were in Surrey. Single family homes are simple and quick to permit, construct, and sell if need be.

There are still 19,292 housing units under construction in the Vancouver CMA. 13,754 are condominiums. There are 4,912 units under construction in the City of Vancouver and 3,007 in the City of Surrey.

There were 925 completions during July. 367 were townhouses. There were 222 completions in the City of Surrey.

The number of completed but unabsorbed units has been rising and is at 2,350. 726 of those are in Surrey and 307 of those are single family homes.

Vancouver - July 2009 Housing Starts

The Canada Mortgage and Housing Corporation released housing starts yesterday for the month of July and it was in the news across the nation. Vancouver saw a measly 516 housing starts during the month of July.

This does not bode well for construction employment. Many of the nearly 20,000 units under construction currently will complete in the next 6 months and I expect the number of unemployed construction workers will skyrocket as there are very few projects to pick up the excess labour.

Ubergeek Post Update June 2009 - Price Changes and Months of Inventory in GVREB

Here is a quick update on the work mohican and I did in spring 2008 around refining mohican's work tracking price changes and months of inventory. Remember that the best fit was to track half-over-half (i.e. 6 months over 6 months) price changes to a three month moving average of months of inventory (total active listings at the end of the month divided by the sales in that month).

Here is mohican's famous scatter plot for half-over-half versus 3 month moving average MOI (the red dot is June 2009's datum):



Remarkably the correlation is disturbingly accurate into the downturn. Looking forward we can see how well the model has "predicted" the next month's price movements.



Weak-minded fool that I am, I second-guessed myself and thought the benchmark would come in at $690K, though if I had stuck to the model I would have been closer. I am at a loss to explain the reason for how well this model has done in Vancouver. Other cities where I have tried to run similar analysis show nowhere near as tight a correlation between months of inventory and price changes. Since the causation underlying this model is not well understood the model is interesting but not much more -- it will track until it doesn't.

If you're flabbergasted by the market's recent strength, consider affordability has improved close to 30% in the past year (thanks for pointing this out, fish10). That's a Brobdingnagian shift, even with aggregate incomes coming under severe pressure.

CMHC Housing Starts for Greater Vancouver

The CMHC released preliminary housing start data for areas across Canada today and here is the picture for Greater Vancouver.

There were only 469 housing starts in May 2009 contrasting with 1757 in May 2008. Ouch.

Starts are on a steep downward slope right now and 2009 is shaping up to be the worst year in recent memory for new development. Construction jobs are being shed at a record rate right now as projects complete and less new projects fill in the pipeline behind them.

No Charts for You!

The kids are napping and I've got only a few seconds to post before going out to enjoy the sun so no charts today.

CMHC released complete April housing data for Vancouver and Abbotsford last week.

Here are the highlights:

Year to Date Starts 2008 - 6691

Year to Date Starts 2009 - 2302

Year to Date Completions 2008 - 5540

Year to Date Completions 2009 - 5377

Under Construction April 2008 - 26253

Under Construction April 2009 - 22494

Completed but Unabsorbed 2008 - 1445

Completed but Unabsorbed 2009 - 2368

Surrey has a crapload of unabsorbed new housing (754 units) and many more units on the way (5344 units under construction).  

Vancouver CMA Housing Starts - April 2009

The CMHC released housing start data for April 2009 and the numbers are abysmal.


There were only 483 housing starts during the month of April. This is really bad news for those working in the construction business.





Developers are continuing to adjust to the new reality of lower sales volume and a distinct lack of speculators to snap up inventory as it is released.

We are perhaps in the 3rd or 4th inning of this correction and it doesn't look like things will get better anytime soon in the Vancouver real estate market. I'll be surprised if they do.

March 2009 Housing Starts

From the Vancouver Sun:

Housing starts across British Columbia remained depressed in the first quarter of 2009, falling almost 70 per cent compared with the same quarter of 2008, Canada Mortgage and Housing Corp. reported Wednesday.

While housing starts ticked up slightly in March on a national basis, builders in B.C. started work on 2,517 new homes in the first three months compared with 8,532 in 2008.

"Developers and homebuilders in B.C. are starting fewer new homes in response to a well-supplied resale market and weaker housing demand," Carol Frketich, Canada Mortgage and Housing's regional economist for B.C., said in a news release.

The declines in starts ranged from almost 93 per cent in Kelowna, where builders started on 72 new homes compared with 985 in the first quarter last year, to 31 per cent in Nanaimo, where builders started on 170 new homes vs. 247 in the same months a year ago.

And the pace of new-housing construction slipped in March to a pace that would see builders across urban B.C. start work on 10,000 units in 2009, compared with a pace of 12,000 units seen in February.

In the Lower Mainland, Metro Vancouver saw starts fall by two-thirds, 1,829 units compared with 5,131 in the first quarter of 2008.

Across Metro Vancouver, West Vancouver saw the steepest drop in the first quarter at 92 per cent, with the Tri-Cities and Surrey not far behind at 91 per cent.

Delta was the only municipality to see an increase in housing starts. Builders there started work on 81 new housing units, an increase of 55 per cent in the first quarter from a year ago.

"The slowing housing starts trend that began in the last part of 2008 will continue," Robyn Adamache, Canada Mortgage and Housing's senior analyst for Metro Vancouver, said in a news release, also citing well-supplied resale markets and a growing inventory of unsold new homes as the reasons builders are holding off on new development.

Across Canada, home construction rose unexpectedly in March, led by Ontario and Quebec, Canada Mortgage and Housing Corporation said Wednesday.

There were 154,700 housing starts on an annualized basis during the month, up from a revised 136,100 units in February, the government agency said.

Many economists had expected housing starts to dip to 130,000 units in March.

“Higher multiple starts in Ontario and Quebec were the main contributors to the rise in new construction activity in March,” said Bob Dugan, CMHC’s chief economist. “While the multiples segment experienced the largest increase, the overall boost in starts was broad based, encompassing the singles segment as well.”

With files from Canwest News Service
© Copyright (c) The Vancouver Sun

Fraser Valley Real Estate - March 2009

The Fraser Valley Real Estate Board released their March statistics package last week and here are some of the highlights:

There were 1006 residential real estate transactions in the Fraser Valley. Sales were up from February but down significantly from previous years.



Active Listings are quite high and will likely rise through the spring and summer.


Months of inventory is at an elevated level of 9.8 and will likely remain at or around this level for the next two months before rising for the remainder of the year.

The FVREB House Price Index, in an uptrend for the past 4 years, has now fallen significantly from peak levels last spring. Even with an uptick the last couple months we are at 2006 price levels. We will see if prices hold up or not this year.


Months of Inventory has a high correlation with price changes and at the current and expected future inventory levels through the remainder of the year we should see continued negative pressure on prices.