Monday, 3 December 2012

GF: A few points at the start of December

- Dec 2011 had 21 business days, with Dec 24-26 landing on Sat-Sun-Mon.
- Dec 2012 has 19 business days, with Dec 24-26 falling on Mon-Tues-Wed.

- Total Inventory (TI) on first day of Dec 2011: 14182
- Total Inventory (TI) on first day of Dec 2012: 15974 (+13%)
  (REBGV live stats thanks to realtor Paul Boenisch)

- My guess is Dec 2012 sales -30% YoY, -30% MoM (Nov 2012 sales = Dec 2011 sales)

2013 January is projected to have 
+13% TI vs Jan 2012, 
+35% vs Jan 2011,
+39% vs Jan 2010, 
+1.5% vs Jan 2009 (!), 
~+40% vs Jan 2008.

Now let's assume 2013 sales run at -15% YoY, and TI stays at +13% YoY

Projected Months of Inventory in 2013:

MOI  2013 2012 2011
Jan  10.6  8.0  5.7
Feb   7.3  5.5  3.9
Mar   7.0  5.3  3.2
Apr   7.9  5.9  4.4
May   8.3  6.3  4.3
Jun  10.4  7.8  4.6
If this projection is correct, then 2013 will have the MOI trough at 7.0 in March – and that’s still in “Buyer’s Market”!

**Rule of thumb:
Seller's Market = MOI <5
Balanced Market = MOI 5-7
Buyer's Market = MOI >7
This is my "moderately conservative" projection.  I'm leaning toward a -20% or worse YoY sales figures in 2013.

Conclusion: 2013 will be a fun year.


  1. Great blog, big fool! This is an interesting starting point, I don't know if sales will be as low as you are forecasting, but if you're right by my estimates we're looking at close to -8% YOY in early 2014. That would be significant, putting Vancouver on a trajectory for a 5-year-long (what I would classify as "severe") correction.

  2. Welcome Jesse! I've been using this blog to deposit my posts on several Chinese RE forums, in case my accounts get banned or posts go "missing" due to my perceived status as "jealous renter with sinister agenda to devalue Vancouver RE" (I'm sure some of the forum mods, esp ones who are realtors/mortgage advisors/pumpers feel this way, lol).

    I'll try to blog in English too now!

    Re: YoY sales decline in 2013, the -15% is just a "guess", though we have been running at -20% to -30% YoY sales levels for over 6 months. Even if sales just decline by 8% YoY, March 2013 MOI will still be 6.5 (if TI +13% YoY), at balanced/buyer's market, quite poor for a prime spring market.

  3. We can start making some guesses as to what 2013 will hold. A few things to consider:
    Immigration intake is holding steady
    The rest of the country is, for the most part, not doing so hot for jobs
    Interest rates look to remain low for a while
    Access to household credit looks to be tighter nonetheless
    China may be in for a temporary blip in GDP
    Housing starts are still on an uptick, I expect completions to be higher in 2013 than 2012
    Reported incomes for FIRE related jobs are going to be lower
    Renewal gap (IRD on 5y renewals) will remain strongly negative for most of 2013
    CMHC still has a cap in place, though it's quite possible that's raised at some point

    There are a few more things to consider I'm sure. Employment and wage growth are important factors to track but these are either lagging or noisy so difficult to garner much in the way of much useful for predictions. We can use these as a template for what 2013 might bring, and use it as a baseline against other years, or convince ourselves that 2013 will be wholly unique.

  4. All salient points!
    I wanted to add in Consumer confidence, which I suppose is tightly associated with most of the above factors (income/unemployment/debt level/macro factors). While searching for articles linking consumer confidence with housing price, this article popped up high on google's search result list:
    Self-reinforcing effects between housing
    prices and credit - Evidence from Norway

    Mostly over my head, even more so at 2am, but managed to read the conclusion. Looks like it's describing the "self-reinforcing" cumulative effect of credit and housing prices (formation of bubble), and how consumer confidence is a major variable determining short-term home price movements.

    That led me to wonder, if multiple negative factors (credit tightening, income stagnation, unemployment, high debt, poor national/global econ outlook) coexist, perhaps a self-reinforcing cycle of RE-depreciation and further-decreased credit availability will emerge in Canada - unless the government steps in to break the negative cycle (not likely in near future as reducing household debt level seems to be Flaherty's main goal)..

    2013 might very well be the year for the self-reinforcing "financial decelerator" to kick in, a.k.a "bursting of a bubble"..