Tsunamis - VHB Makes an Encore Appearance

How do tsunamis work?

This first image does a good job illustrating how a real tsunami works. Watch out on shore when that tsunami hits. It is a dangerous place to be.


This second image does a good job illustrating how a condo tsunami might work. Thanks VHB. It shows the massive amount of condos under construction in the Vancouver area. One could call it a tsunami of condos. Watch out when it lands on shore when these condos start completing. It could be very dangerous.

Note: this chart does not include the additional 5,000 units that have been started since September 2007.


'Nuff said. Have a great weekend.
mohican out.

CMHC Data - VHB makes an appearance

The VHB sent me some really interesting data this morning and I've spliced into my own data collection for our enjoyment.

Here we have the CMHC housing market data from 1948 until present. This includes starts, completions and units under construction. As you can see we are in completely unprecedented territory for the number of units under construction. Local builders really have no idea how much of a supply glut they are creating right now. This will be unfortunate for them but fortunate for me because I'd like to buy a new home at a steep discount. Bring on the supply!



As you can see from this second chart, population growth hasn't been the driver for this new construction and if we had more recent population data we would also see this trend continuing of a low ratio of starts to new persons. This will inevitably cause a supply glut and prices will fall. Builders are continuing to build because people are still buying the units they are putting onto the market.

The problem is that many of these people are either:
1) Speculators who plan to flip for profit - good luck with that
2) Wanna-be landlords who are going to bleed a tremendous amount of cash to hold on to their 'investment' and who will eventually sell because they can't afford to subsidize their renters, like me, for very long.

You can easily see that this is an unsustainable situation. Eventually the carrying costs of an average property must be equal to or less than the income from rent.

Thanks VHB. You give energy to this tired blogger.

Fraser Valley Real Estate - April 2008 Analysis

Warning: Obligatory toot-toot press release:

(Surrey, BC) – An increase in choice continues to be the real estate story in the Fraser Valley, with the Fraser Valley Real Estate Board receiving a record number of new listings on the Multiple Listing Service (MLS®) in April.

The Fraser Valley Real Estate Board received 4,458 new listings last month compared to 2,922 new listings received during April of last year, an increase of 53 per cent. That swell of new inventory took the number of active listings to almost-record highs, reaching 11,111, an increase of 43 per cent compared to the 7,764 listings available during April 2007.

Even with the surge in listings, April sales remained strong at 1,787 total units sold, on par with the 1,781 sales sold in April of 2007. Kelvin Neufeld, the president of the Board says the last time Fraser Valley buyers had so much to choose from, was in the spring of 1994.

The price of a single-family house in the Fraser Valley averaged $547,590, representing a 4.7 per cent increase from April 2007. Townhomes went for an average $344,659 in April, an increase of 7.5 per cent compared to the same month last year when they averaged $320,702.
Average apartment prices in the Valley continued to rise in the double digits increasing by 10.3 per cent compared to last year. They averaged $213,901 in April 2007, compared to $235,840 last month.

Sheesh - look at all those listings. The real surprise this month was the strength of the sales numbers. With strong sales like last month the market is proving that a fool is easily parted with his money - a greater fool that is.

Median price gains are slowing down.

Year over year price gains in the house price index are slowing way down too. I am looking to August for negative year over year numbers.

The strong correlation between the Months of Inventory level and price changes is very strong. We had 6.2 months of inventory in April and because of exceptionally strong sales prices did not decrease.

Greater Vancouver Real Estate Analysis - April 2008

Good afternoon,

The Real Estate Board of Greater Vancouver released the data pertaining to the local market for the month of April with the obligatory 'toot - toot' and press release printed in the local rags. Here is the press release:

VANCOUVER -- Sales edged down and new listings took another big jump during April in Greater Vancouver's real estate markets, although so-called benchmark prices remain higher than they did a year ago, according to real estate board figures.

The Real Estate Board of Greater Vancouver reported 3,218 sales through the Multiple Listings Service, a five-per-cent decline from the same month a year ago. New listings added to inventory were up almost 26 per cent to 7,010, although board president Dave Watt, in a news release, said homes, on average, took six fewer days to sell than in April of last year. "Residential sales continue to be strong, but there is a lot more choice on the market today," Watt added.

The benchmark price of what is considered to be a typical detached home on the board's housing price index was $771,321, up 11 per cent from April a year ago. For townhouses, the $477,900 benchmark price was up 1.05 per cent from a year ago. For condominiums, the benchmark was $389,070, up 9.6 per cent a year ago but down slightly from the previous month.

Average prices for detached homes and apartments, however, were both down from the previous month. In April, the average detached home across the region was $880,844 in April compared with $919,593 in March. The April average for townhouse prices was $509,809, down slightly from $510,428 in March.

This release in indicative of a 'balanced market' very similar to last month although many signs point to big moves ahead of the negative price action variety. With the current rate of increase in the active inventory and the lower level of sales it is only a matter of time before sellers cut prices to attract buyers.

Here are the visuals.

Guesstimates

The local real estate boards will be out with the monthly numbers tomorrow and I am guessing we will have price declines across the board. The inventory level is reaching super-bearish levels in the outer areas and bearish levels closer in. These levels of inventory are so high that it is unavoidable to have price decreases as sellers compete for buyers.

What are your guesses at the numbers?

Mohican thinks:
REBGV - down -1.5% MOM
FVREB - down - 2.0% MOM

Oh - - - if only I could short Vancouver real estate.