Real estate sales volume in the Vancouver area plummetted nearly 43% when comparing June 2008 to June 2007.
Active Listings are skyrocketing due to the surge of new listings combined with the lower sales numbers. Active listings in the Vancouver area are up nearly 53% when comparing June 2008 to June 2007.
The Sales to Listings ratio is extremely low and well into "buyer's market" territory even when comparing the normally hot market of June to the slower winter market. Although we are far from an attractive entry point for new buyers, including this humble blogger.
The Months of Inventory is shooting up so fast it is even astonishing this ardent real estate bear blogger. We are poised for a rapid turnaround and this will likely be viewed as the turning point by many analysts.
The relationship between supply, demand and prices should be obvious to any Economics 101 student but here it is in black and white (and red and blue) for us.
The bomb has hit, folks. Grab the popcorn, or perhaps a coffee from one of Rob A's favourite cafes, and enjoy!
ReplyDeleteMohican, for the REBGV Months of Inventory and House Prices, would it be possible to add a legend so we can see which line is which? It's not obvious if red is MOI and blue is Prices.
ReplyDeleteI really do like these graphs though, and appreciate the effort you put into them, make no mistake!!
Thanks Mohican. Great charts and analysis as usual.
ReplyDeleteThat MOI/price chart may have to have the line extended soon.
To see such a increase in inventory during the major selling season is astonishing. Look at previous years in which June represented the low end of the inventory cycle. That trend has now been completely reversed.
ReplyDeleteI can't see how this situation could possibly resolve itself over the summer and it will only be aggravated by normal the fall/winter weakness to come.
This is the metaphorical equivalent of a real estate market hitting an iceberg, and seems to surpass anything I saw in the U.S. markets -- and I tracked them closely beginning in 2005.
The beginning of the end has started that's for sure. My question is how fast will these market dynamics translate into lower selling prices and secondly just how low will it go.
ReplyDeleteLooking at the REBGV average price chart since 1977 my prediction is that prices could back-off as much as 40% or more (you may think I am crazy but markets always overshoot the equilibrium... irrational exuberance at the top of the market and irrational despondence at the bottom).
Remember, "Don't try to catch a falling knife!"
There is a huge amount of completions for new developments coming in the next couple of years and much of that product has been purchased by speculators. If prices start to fall they will chase the market down to get-off their holdings before the "complete crash"... their pain will be somebody else's gain. I am hoping I'll be one of those somebodies.
So would you recommend to someone who's just sold their place to hold off buying/rent for a while as prices decline?
ReplyDeleteA bit surreal to see it actually happening after all this time waiting. Thanks for the graphs which show it as clear as day!
ReplyDeletet prices could back-off as much as 40% or more (you may think I am crazy but markets always overshoot the equilibrium.
ReplyDelete40% is an undershoot. Prices would still be higher than justified by fundamentals.
Looking at it another way, a 40% decline would just bring prices even with Toronto, which has similar rents and higher incomes. And Toronto is headed for declines.
In 1981 the market dropped for 18 months and sat at the bottom for 2 years. It is fairly common for Vancouver and Toronto to reverse positions. Vancouver has been in the past as little as 50% of Toronto and as high as 200% of Toronto. It is noteworty that in true beauraucratic style CMHC closed the door after the horse ran out. They have just knocked the market down a few more notches by tightening credit. They should have done this 3 years ago. It will have an impact.
ReplyDelete