Monday, March 04, 2013

Greater Vancouver Market Snapshot February 2013


Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to February 2013. (see REBGV news releases.). (My "next month estimate" numbers are what I think next month will be. Also note these graphs update automatically so older blog posts from previous months will show the same graphs as the ones below.)


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:

February 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). February 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 February 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.

My estimates for February were for inventory of 14335 (actual 14789) and sales of 1891 (actual 1797) based on estimating average changes from January of years 2005-2012. Using the same technique estimates inventory and sales for March of 16067 and 2237 respectively (MOI=7.2). March is typically the nadir for MOI in recent years, the exception being 2009 that saw MOI decrease throughout the year. If 2013 turns into 2012 redux, but at a lower base of sales and a higher base of inventory, that portends more seasonally-adjusted price drops. To hit some forecasters' call for flat to rising sales volumes for REBGV in 2013 compared to 2012, there are going to need to be some rabbits on order.

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