Thursday, May 28, 2009

Vancouver Home Values Still Declining according to Teranet

Monthly real estate sales may be increasing from their January lows and realtors may be boasting of multiple bidding wars and properties selling over ask price, but the big picture reality is that Vancouver Home values have now declined for a ninth consecutive month.

According to the Teranet—National Bank Composite House Price Index, which was released Wednesday, Vancouver prices fell 6.4 per cent between January and March. More significantly the March drop was the ninth consecutive month of decline on the financial institution’s measure.

The Teranet—National Bank index pegs Vancouver's market peak at June of 2008. Since then the market has declined almost 12 per cent.

So with all the hype from the real estate pollyanna's, should we expect to see a dramatic turnaround to that downward trend?

“I’m not making a forecast,” Simon Cote, managing director of property derivatives for National Bank Financial, said in an interview. “But if we look to previous business cycles, very seldom do we see the house-price index turn around in a direct V shape.”

He looks to the volume of sales as an indicator that the decline in values is stopping, and the sales volumes that are captured in the Teranet index were still low compared with a year ago, some 40 per cent below last year in Vancouver’s case.

“Until the year-over-year change in volume starts to pick up and be positive, even if it is low, it is going to be very difficult to see a turnaround [or stabilization] in the index,” Cote said.

The Teranet—National Bank index is calculated based on repeat sales of existing homes, known as paired sales, to capture direct examples of changes in value, rather than just measuring the average value of all homes that sell in a given month.

National Bank Financial uses the index as the basis to trade housing futures, builders or lenders to make bets on whether home prices will increase or decrease and hedge against volatility in housing prices.

It tracks housing prices in Vancouver, Calgary, Toronto, Ottawa, Montreal and Halifax.



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