I think we have a tale of two markets. The first is the Fraser Valley and outskirts of Vancouver. While they bounced back from the near catastrophe of last fall, it was a fairly modest rebound.
On the other hand we have had a much more robust rebound in Vancouver proper, especially the previously red hot areas, which are now glowing again.
The question is whether the weakness from the outside will work it's way in or the heat expand out.
Regular readers may remember us charting the progression of the first major drop..it started with rising inventory in Surrey and Langley and surrounding areas, then MOI started rising and finally prices fell. In due course this spread to Vancouver itself.
We will keep our beady eyes out to see which way it goes. Inventory has started to inch up a tiny bit. However it is still too soon to call it a trend.
It's All About the Economy Stupid
Mark Carney has called the end of the recession. Well he actually said it would probably end in a few months. The stock-market obviously agrees since world indices are about 40-50% higher than their Armageddon lows of March 09. I am not so sure.
Lets crunch the numbers. We were literally in free-fall late 2008 and early 2009. The GDP in Canada was dropping at an annual rate of 3.7 in the last quarter of 2008 and 5.4% in the first quarter of 2009, and will probably be down 3.4% in the second quarter. These are Major Depression numbers.
So I for one am glad that they pulled everything they had out of the bag and dropped rates down to almost zero to prevent food riots and mass unemployment (yes it was possible).
However I do not have ANY confidence in the predictive abilities of the BOC..Fed..etc. We in the blogosphere have been saying for years that the mountain of debt built on bubbling assets was a recipe for disaster. Furthermore deregulation eg the crazy trading of US brokers and insurance companies or the sale of garbage-backed paper to Canadian investors was unsustainable.
Our regulators and policy makers, who mostly come from the investment industry, assured us that all was well.
"We are insiders, trust us, we know how it works."
Late 2008 they all looked like deer-in-headlights and ripped the cover off the tax-payers' cheque-book and threw as much money as they could at the collapsing assets to put a cushion underneath them.
If they were so bad at predicting the arrival of the biggest financial cataclysm of the last 70 years, should we trust them now?
I expect rather tepid growth for some time. Even though we have are no longer in imminent collapse, we still have de-leveraging and over-capacity to deal with. We also have a lack of any drivers taht I can see for a new leg-up.
Last week-end I drove around Vancouver and saw lots of commercial real estate in trouble. Shops and offices down-town vacant and strip malls with empty stores. The situation is the same in many industrial parks where businesses are leaving or down-sizing.
Metro Vancouver's office vacancy is up from 5.7% late 2008 to 7.4% mid-2009. Which businesses suddenly start soaking up this excess? I would guess that we will be up HIGHER by the end of the year lease renewals will be at lower rates.
My proof - I rent my business space and my home - and for the first time - neither increased their rents but were just happy to have me stay.
So I think we have a modest rebound, and then folks realise that the recovery is going to be slow and job-less and that in the meantime, governments are going to have to provide for more people with less revenue. I suspect that will come in the next few months and will be looking to the stock-market and bonds for clues that the investment community is moving from the euphoria of non-collapse to a realization that this is no ordinary recession. BTW if Mark Carney is right that would make it a very short recession of about a year or so.
From 'end-of-the-world' to short recession - I don't buy it.
Low rates and oil and cheaper stuff
We have had a huge fiscal stimulus. Interest rates are lower, oil is less than half what it was a year ago, and many things like cars and furniture are being sold with 0% interest rates.
So those with secure jobs have been using their newly acquired disposable income to buy a house or move up.
I would have thought the effect of this huge boost would have ended by now, and the reality of a fragile job market and on-going recession would have pulled the carpet from under the rebound in housing. However I underestimated the effect. It went on longer and stronger than I thought. It happened across the country, with some cities reaching new price highs.
Thankfully that hasn't happened in Vancouver (yet!) and frankly speaking I doubt it will, but will be watching the numbers heading into fall very carefully.