Friday, March 27, 2009

Spring Thaw

Vancouver housing has seen a Spring Thaw. You can see it in Paul/Gavin's numbers and in Kopyrightklepto's numbers here:

However the reasons for the up-tick is clear:

1) Nothing goes up/down in a straight line. There are folks who missed the run-up and have been kicking themselves. This is the first significant down-turn and a chance for some to get into housing.

2) Low mortgage rates buy you more home. 4.05% for a five year fixed is a pretty good rate (ING Direct). There is a concern that with all this debt being piled on by the governments, long rates and hence mortgage rates will eventually head up. I think we are still a long ways from that, but it is driving some buyers to lock in and buy.

3) We had very low sales in December and January. Months of Inventory had reached a catastrophic (and unsustainable level of 20). The sales were down due to many reasons including the heavy snow-fall, which realtors told me cut open house traffic, and of course the shock over the financial crisis, which people have become accustomed to. This demand ended up in Feb and March and added to the normal Seasonal increase in sales.

4) The financial crisis is still a TV event. We have been spared any major disasters so far. The US and Europe are getting hammered, but due to on-going projects, a better banking system and quick action by the Government (forced into acting to stay in power!) we have so far escaped the worst.

However we are not an Island and I can see increasing anxiety about job losses and reduced spending. None of this fills me with glee. Those of you who used to read the old blog know that I was saying a couple of years ago that this would be the final result of reckless unproductive speculation.

In any case we are still well above the previous few years in inventory:

We will have to see how far this Spring thaw goes. I suspect we get a slow struggle until summer when the 'must sell' folks drop their prices, and buyers bargain tough. Then we have a lull as sellers hold out for the hoped for post Olympic euphoria. By then I suspect we will have all come to realisation that this is no ordinary recession and there wont be a quick rebound.

Add in the post-Olympic price tag and you can decide where house prices are headed.

Good to see some old friends in the comments area. Thanks for the welcome back.