Thursday, July 31, 2008

Monthly Speculation

Well, it is the end of July and the Vancouver area real estate market ain't so hot anymore. We've got over 20,000 homes listed for sale in the REBGV area, over 11,000 for sale in the FVREB area, and yet another 1,100 homes for sale in the CADREB (Upper Fraser Valley) area. This brings the grand total of listings to well over 32,500 and sales so far down the toilet that it's nearly unbelievable. This brings our total months of inventory for the entire region to over 9 months and we are at a listings per person ratio in excess of 1 listing for every 75 residents of the area. Population stats here: GVRD, FVRD.

This means that our current inventory levels are higher than the bubbliest of bubbly US markets and sales still have further to fall which is going to put even more pressure on prices. I fully expect Months of Inventory to be well above 10 by September / October and even higher in the wintertime. The pressure for price declines will be enormous as some sellers will need to sell and they'll have to cut their price dramatically in order to do so.

We've discussed price changes before and the relationship between price changes and the supply / demand function (Months of Inventory). Given that relationship, if April was the official top of the market for prices, July should prove to be the month that the market turned sharply negative in terms of price changes.

My personal speculation is that benchmark prices will likely be down 2.5% give or take 1%. What's your thoughts?

15 comments:

macho slob said...

One listing for every 70 residents works out to a population of 2.24 million. No argument here, but some confirmation of that would be welcome.

Anyway, the highest inventory level of the bubbliest bubbles is quite the achievement. Price drops for the next couple of months could be shocking.

mohican said...

I fixed the numbers macho slob - I was off by a couple hundred thousand and my listings count was low.

Population of the GVRD = 2.25M
Population of the FVRD = 255K

jesse said...

-1.1% MOM GV Detached. I'm only speculating on the market, not in it :). Call me a greedy speculator.

M- said...

I'm expecting the REBGV SFH average to be down 7.7%, and the benchmark SFH to be down 1.7%. (MOM, of course).

If you take the inventory numbers one step further, considering the average household size of 2.3-2.8 people, it implies there's one home for sale for every ~30 households in the lower mainland.

freako said...

I am with Jesse, -1.1%, give or take. I think we were down 0.7% last month, and that ought to go up a notch (but not more). I don't think we will see 2% monthly drops for several months yet (unless panic sets in). Also, don't forget that 2% is quite a bit on an annualized basis.

Paul said...

Great report Mohican! More inventory than any US market? That is scary.

PB

Jane Neas said...

Wow. I can't believe those statistics. Actually, I can, but I really don't want to... Because of the all the real estate on sale, I'm sure there are plenty of businesses that aren't doing well right now. I want to buy out one of them, but I haven't been able to find one that truly interests me. Do you have any suggestions? Thanks.

VancouverGuy said...

2% is massive on an annualized basis. I am actually considering some gonzo journalism, whereby I put up a few posters on the street of price declines and inventory numbers just for the fun of it to see people's reactions and whether it passes on at all. "27% annualized decline in prices!" I live downtown, so I could just post them on the bill areas that are around here.

Anyone have any suggestions on what I should write? Now that my friends have sold their homes I don't have a problem with injecting a little bit of reality into people's minds...

denny said...

You should also hit craigslist/real estate forsale with stats.

Van Real Estate Crash 2008 said...

Vancouver:

"Anyone have any suggestions on what I should write? Now that my friends have sold their homes I don't have a problem with injecting a little bit of reality into people's minds..."

Take a look at RC's blog, there is a poster who appears to be taking a novel and interesting approach.

He poses as a "real estate bull"
But, at least in my mind, he is doing a great job as a Trojan Horse.

freako said...

"27% annualized decline in prices!"

I made that mistake too once. Remember, declines compound the other way, it is less than 24%.

Jonas Florendo said...
This comment has been removed by the author.
Jonas Florendo said...

@Jane -- I suggest going to BizTrader.com. It's an online global marketplace where you can buy, sell, and invest in small business. There's a wide selection of businesses, so definitely check it out sometime. good luck!

Jonas Florendo said...

@Jane -- I suggest going to BizTrader.com. It's an online global marketplace where you can buy, sell, and invest in small business. There's a wide selection of businesses, so definitely check it out sometime. good luck!

Kevin said...

Jane - try BizAg.com which lists over 150,000 businesses for sale.