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Tuesday, January 14, 2014

One blogger's take on the Vancouver Inventory numbers



An interesting post by 'Jesse' over on Vancouver Condo Info well worth sharing. For those who do not know, Jesse is the author of the Housing Analyst blog.
We concentrate on stuff like sales and listings and inventory. Here is a quick look at inventory going back to 2005, as of the end of February:

                                          1995 17377
                                          1996 17025
                                          1997 17506
                                          1998 17988
                                          1999 15663
                                          2000 14149
                                          2001 14091
                                          2002 10349
                                          2003   9692
                                          2004   7667
                                          2005 10599
                                          2006   8310
                                          2007 10414
                                          2008 11420
                                          2009 16280
                                          2010 10782
                                          2011 11925
                                          2012 14055
                                          2013 14789

The second half of the 1990s saw a steady erosion of prices and inventory was elevated for most of that time. This inventory was slowly chipped away in the early 2000s, and prices started taking off in a major way in 2002 and 2003, around when inventory looked to have bottomed. That started the last major boom from 2003 through to 2008. After the last recession inventory has been generally elevated and price rises have been more muted.

It looks like inventory at the end of February is on track to be between 13000 and 14000. This sets the “base” for inventory for most of the spring selling season and some increased competition for sellers.

Price drops (from Feb to June) in the spring in Vancouver are rare. I do not expect this year to produce price drops over that period in 2014. However given the “high” level of inventory, what looks to have been mediocre rental growth over the last year, robust completions and the purported “advance buying” due to rate rises in 2013, I do not think prices will rise significantly in the first half of 2014.

I am awaiting Vancouver population growth to mid-2013 (to be released in the next 1-2 weeks). This will provide some indication on how much Vancouver CMA has grown; growth into the region usually leads purchases by about 6-12 months as in-migrants often wait before deciding where to buy in the region after moving here.

I still think the prevailing trend for Vancouver-area property is down but I do not think it will be in a straight line. 2013 was stronger than I think will be the average over the next 5 or so years. We’ll have to see if 2014 can repeat this performance, and I would never underestimate the possibility that assets like property will be boosted by low interest rates and robust equity valuations for a few more years.
Anyone have any thoughts?

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1 comment:

  1. My Vancouver housing chart
    http://www.chpc.biz/vancouver-housing.html
    shows that since the pit of gloom in 2009, we have had stair stepping higher in total residential inventory and stair stepping lower in total residential sales.

    SFD Prices appear to be range bound since 2011 (except for the melt-up in 2012 by a few energetic bidders and strata unit prices depending on location and condition have been range bound since 2007. All of this has happened under a ZIRP policy; ie: "low cost" money has not led to the market breaking out of a stubborn range.

    I argue that the low cost of financing is no longer really a prime inducement to buy because at a fundamental level it's the principal amount borrowed that is required to be paid back.

    I think the prime mover has been sentiment; that buyers are convinced that their purchase will rise in value over a time span with a velocity that will make the cost of their principal borrowed much cheaper than rent.

    ie: it boils down to a belief that inflation will win the day.

    Unfortunately, earnings in BC look like they are flattening and have not been able to get anywhere close to "inflating".
    http://www.chpc.biz/earnings-employment.html

    Perhaps the recent drop in the CA$ will be a catalyst for rising earnings... but that will only be for workers in the export markets and it will cost everyone more, regardless of job description when buying imports which is what most of us do.

    I say the earnings chart is the one to watch to see if we are going to get significant increases in housing prices. If you want to buy real estate in an earnings friendly environment, Alberta is where the action is.

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