Uncharted Territory, Charted – Inventory Climbs

– chart care of b5baxter at vancouverpeak.com, who adds “May should be interesting to watch. Will inventory increase rapidly as it did in 2010 and stay in record territory or will it fall below the 2010 levels?”

12 responses to “Uncharted Territory, Charted – Inventory Climbs

  1. This is not really uncharted territory. From jesse:

    April month end inventory
    1995 19298
    1996 19374
    1997 18969
    1998 20578
    1999 16958
    2000 15823
    2001 14921
    2002 12275
    2003 10213
    2004 9913
    2005 11637
    2006 9638
    2007 12135
    2008 15218
    2009 14891
    2010 15620
    2011 14187

    • Flaherty has no plans to increase the MI cap? I’m sure he doesn’t. I’m starting to think he doesn’t understand what his government actually owns.

      Daring Friday commentary: CMHC isn’t the problem any more, but it will be the “solution”.

  2. The inventory rise I see this year is more conducive with slowing population growth than what we saw in 2008, which was likely more credit-driven — population growth in 2008 and 2009 was well above the 10 year average and allowed inventory to be absorbed more quickly than it would have otherwise.

    The other stat to watch is CMHC starts and completions. We should see additional inventory in the latter half of 2012 as the recent uptick in starts begins to translate to completed units. That will have some short-term effects on inventory but — just a guess — no matter what the starts and completions, high prices will elicit enough for-sale inventory to cause prices to fall. Or put another way, it’s unlikely that prices will stay high by virtue of low completions. Maybe, but I’d be surprised.

    • “it’s unlikely that prices will stay high by virtue of low completions.” – jesse

      This concept confuses govt. The regulators and academics think it’s a matter of adjusting price and credit to stimulate a market, or limiting supply to induce demand. Just as realtors think promotion, and developers think product and location. They don’t understand that a market creates itself and its own demands. People will stand in line all night if they want something, but people aren’t seeing anything they like, at least not to go into whacko debt. There was a big market, now there is a smaller market. Just like in the previous post, “RBC Anticipates”, banks see it as a price decline down to what the market will bear, when it’s actually a decline in the market. The market finds it’s own solutions.

      We potential buyers be fickle beasts. People sense that being forced into speculation or risk losing savings to inflation is unnatural. Cash is supposed to be king. But banks have promoted debt instead of cash reserves because they can sell the debt on the open market like an asset. (Nice low interest scam if you can carry on the down payment until you sell to an investor.) People who paid high prices will realize they were just creating their own debt and nothing else. Value became disengaged when land prices shot up to almost par with residential, when there were bidding wars, and no time for inspections. But it was only a short while ago when tenants paid the mortgage and the buyer only needed a down payment. Now tenants don’t cover the cost and the buyer needs inflation to defer profit. Looking ahead, those futures don’t look good. This is the problem with notional valuations.

      Friends I yak with, are worried that if they buy now and pay monthly, their wage won’t be enough if cost of living continues to increase. People are less concerned about price, but that the price exceeds reasonable value. The split between actual value and inflation is apparent. So if they have to sell, they know they’ve overpaid and risk not finding another who will overpay. The speculators and foreign investors are bidding against themselves, and that does not make a market. The real market is the buyer who has a need and requires a good. Potential buyers I talk with don’t express much need, other than cash.

      For a system that survives on inflation and finds itself cornered into zero interest, the only thing it can do is print money and try to raise wages. But the feds are laying off people. The banks same. The only way it could get worse is if a big percent of our GDP was in a trade surplus with a country who is actively trying to devalue their currency. Oops. Anyway, thanks for inspiring this rant. I feel better.

  3. Here is a fun ad from the Georgia Straight today that insults our ability to keep a woman unless we buy one of their houses. Is it the top when they have to play into our primal urges in order to sell their homes?


    • Ray, many thanks… excuse me while I headline this.
      Oh where oh where is ‘condohype’ when we really really need him.
      Coaxable out of retirement for a comment on this beauty?

  4. If you take the emotions out, its easy to make perfect predictions-

    * prices will return to 3.5x incomes, which means an average 60-70% drop or MORE if the economy in Vancouver continues to unravel…

    *this process starts fast and slows as it approaches the bottom, and takes about a decade to run its course.

    *vultching doesn’t have much effect, when the bottom is close NOTHING sells

    * this CMHC debacle is going to cost the taxpayers about an entire years worth of government revenues from all sources when TSHTF. Expect dramatic cuts in services and programs and significant tax increases for about 20 years, if you thought the Martin/Klein kinda cutbacks were brutal you ain’t seen nothing yet.

    * the effect of this unravelling should have interesting social consequences given how elderly our demographic is going to be evolving over the next 20 years

    *the world has changed and a lot of whats out there will simply be unsaleable, with the spectre of much higher taxes and energy costs, there are huge metroploitan zones that will essentially crash for keeps, think ‘Detroit’

    *the social consequences should be pretty negative, there’ll be people trapped in areas they can’t (or stubbornly won’t) flee, people paying higher tax on RRSP withdrawals than they would have to have paid the taxes up front, and I would imagine the domestic violence, divorce, suicides and laid off workers ‘going postal’ will explode as this all falls apart.

    This is going to be a long long process and a lot of unforseen consequences, and nobody is going to benefit from it. Buckle up!


    • Unless you’re a renter working in repo, then it’s a golden time to enjoy cheap toys. Maybe buy a patch in the country. I recall the eighties as a time of community, simple pleasures, the era of the house party. There was an undercurrent of street-level creativity. This was pre-police , of course, when we would gather and mingle looking for free entertainment unimpeded. Skunk, personal computing, and Men without Hats were the prime accomplishments of this period. College was also cheap and you could always get piece work telephone soliciting. Accessing government services was like getting soup from a stone, but a beef dip and a beer were two bucks at the bar. Pole dancing was born. In Calgary, people were walking away from $70k mortgages in Temple and Falconridge. The Dow was 1700 and interest rates were 12%. Gas was 40 cents a litre. People also severely kicked the tires before buying anything and debt was a bad word. (We made money selling wood stoves and firewood.) That’s when the phrase “trapped in a mortgage” was born. Camping was quite popular and anyone on the street could show you how to fill out your unemployment cards.
      Good times.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s