New Transparent Picture
Posted September 10th, 2009 in Real Estate, Statistics | 
Undetermined
Due to a number of undetermined reasons, local Realtors® suffer from a tradition of accepting status quo. We rely heavily on the information prepared by the board for consumption by the masses. While said information is valuable it does not necessarily impart perspective to the consumer that is ripe in its completeness.
Limited Scope
In the past few posts – August’s Apartment Story, August’s Picture Story Attached and Picture Story, there were references to what is referred to in the industry as Municipal Graphs. The information presented has been presented in this format for at least 10 years and possibly more.
They are monthly snapshots of year over year changes in the number of Units Listed, Active Listings and Units Sold. They cover three residential categories – Detached, Attached and Apartments. As stand alone representations of the market place they add value for those who want to understand its history to possibly use that information as predication to their Vancouver home buying and selling decisions.
The format is a sliding year of Units Listed, Active Listings and Units Sold. While one year of information displayed monthly may be sufficient for some, it leaves many more yearning for a broader spectrum.
Friends Help
A regular reader, Chris Taylor, asked the ‘why’ question and for now, at least, the above graph will survive as a possible solution. This first iteration is of Vancouver West’s Detached homes. Hopefully, time permitting, the remaining versions for Attached and Apartments will be forth coming.
With the idea of putting a little more meat on the plate, added is the Average Price of Detached homes in Vancouver West. This graph provides a view that is more global. Via a self centered opinion, this will augment the information provided within the REBGV’s standard issue Municipal graph. Here’s hoping it helps your decision. Of course, if you are about to sell your home, my cell number is located in the upper right hand corner. 
Drivers
As a picture it is fascinating to see that the Active Listings (homes FOR SALE at market), are in a continued slide since September of 2008. It leaves you to ask if the element of ‘scarcity’ is one of the driving factors in the phenomenal upward climb of the red Units Sold. Business week lists possibile drivers affecting this climb – Jobless Rate Jumps to 9.7% in August, Vital Signs: Economic Recovery Prospects Improve, Jobs: Look for More Improvement in August. Additionally, to see the yellow Average Price scream upwards appears to add another dimension other than interest rates are at a historical low. What remains curious is the driver that is keeping people from selling while others are prepared to buy at high prices – prices that are almost matching the high of 2008. Interesting speculation is that a ‘don’t sell now’ driver may be the Olympics. Money has always motivated people to do things. Supposed is that those who have the gold – a home, are simply not motivated enough. It’s remotely possible that any number of Vancouver West homeowners are holding out for the Gold Medal and the expectation that Quatchi©, Miga© and Muk Muk©, the 2010 Olympic mascots, will deliver the medal.
In a Blink
Throwing caution to the wind in a market like this could prove disastrous. Simply, should buyer’s begin to feel that drivers such as low rates and the Olympics make buying a home ‘just not worth it’, they will stop engaging. With that, this market will change quickly – as quickly as failing a drug test. The result will, in a blink of an eye, be a graph with Active Listings surpassing Units Sold.
*Disclaimer: Statistical numbers used to generate graph Courtesy of REBGV. While believed to be accurate they are not guaranteed.
**Quatchi, Miga and Muk Muk are registered tradenames Courtesy 2010 Olympics
I just read a few news articles saying Vancouver sales are up 117% YoY in the headline, yet buried further down the article is the real news, sales are down MoM.
This is a prime example of what is wrong with how the industry reports statistics. They pick the stat that sensationalizes the news, and do absolutely no analysis.
YoY and MoM figures are useless, trend analysis would be much better. This is why I enjoy this blog, it gives more depth than the average news article.
So to anyone considering the whys, here’s some good questions:
- Why are active listings dropping like a rock, while sales are still LESS than new listings? Or more direct:
- Why are people pulling units off the market?
Here’s some questions that the Realtors could answer, yet don’t:
- Why are average prices up for detached units, yet not for attached units? or more direct:
- Is the average listing price much higher than normal? ie only expensive homes are selling (the adage: recessions make the rich richer and the poor poorer, so the rich can buy expensive homes, while lower priced units sit or get taken off the market)
- Why is the sales price still lower than the listing price, yet we’re being told there’s bidding wars going on?
Cheers,
Chris
Chris
Yesserrie we do see some funny – well, not so funny stuff come out. Can’t wait for Halloween!
In response to your questions.
The 117% you refer to is, simply stated – not a fair nor reasonable comparison. As you say, it smacks of sensationalism! Other senior REALTOR types have brought this up in conversation and were accordingly dismayed that it played this way. A consensus was that to ‘Joe and Jill consumer’ this type of statistical information must scare the hell out of them or send them into the depths of depression wondering how they can ever keep up in their search for a home.
In defence – YoY and MoM have their place in understanding market changes with the proviso that they are kept in a global perspective.
You asked ” Why are people pulling units off the market?”
Again, simply, people change their minds about many things – this includes selling their home. A quick glance over the numbers for the west side (microcausm) didn’t leave a sense that there is a gold rush of people pulling their homes off the market. Nothing jumped up to wave a flag. A guess (I haven’t collated that information, so it’s speculation), is that about 40% to 50% relist within 3 months.
As to the reasons why: The reasons for them to do this are many – lost a job – found a job, separation – reconcilliation, was going to get married – the wedding is off but I need a new address (don’t ask!), fear the world is tanking – feeling better about it now. Thought we could move up to a bigger house but couldn’t find what we wanted are just a few. There are as many more as there are homeowners.
You asked: “Prices up for Detached but not for others”:
A logical although not particularly profound response, is that attached and apartments represent a ‘move up’ stage in their homeownership cycle.
Many who buy the newer, bigger, better space known as a home come to the table with equity accumulated while living in their condo.
Added is that they have worked at their job for a while and are now probably earning a higher salery.
They may have inherited some money from Aunt Nell.
The individuals become couples who previously owned separate condos.
Combined sales of each brings more money to the table for the purchase of a home.
Add to this the benefit of historically low interest rates, a bit of auction fever and the prices do get pushed up.
For the first time buyer of a property they may be using all their savings to get into the market. One hopes their turn will come in 3 to 5 years when they have built some equity, got a raise and sell their two condos. The result is that the budget for purchase is much more restrictive leading to offers and final sales prices that can be much lower than you would see in the homes.
Prefaced with the understanding that recent open houses attended witnessed enough shoes at the door to open a store, might indicate that buyers are running wild. Suspect is a different reality where you may now if not soon see the volume of sales drop reflecting buyers being more cautious in their decision making.
You asked: Sales price lower than listing price and what about those ‘bidding wars’.
This one is a little more difficult for most people who don’t deal in large numbers on a daily basis. Some sellers are finding that buyers while in multiple offers are now maintaining a more conservative and from this author’s perspective, a more wise decision to be less cavalier in their buying decision. One concludes that the ‘damn the torpedoes’ attitude of buying seems to be settling down. Wisely, fewer buyers will go forward without inspection or appraisal. For the reasoned buyer, this is as it should be when you consider the price of homes in Vancouver. Add to that unconditional offer, unplanned, unexpected repairs or renovations and the bravado of an unconditional offer becomes very expensive very quickly.
Recent example: 4 offers – 3 with conditions higher dollar offers, 1 without lower dollar offer. The three offers with conditions were at a higher price than the asking. The 4th did not have conditions but was a substantially lower than the asking price. What is the seller to do? Take the chance that the house will not pass muster or grab the money. Think of the addage “a bird in the hand”. On a million plus asking price, a $30K or $70K difference in an offer without conditions is a small percentage to forgo to know that the house is sold. Result the house sells for less than asking.
With the hope of bringing some sense to all of this perhaps Vince Gaetano, the vice-president of Monster Mortgage, succinct comment says it best:
“Last year was a disaster, you have to put things in perspective.”
I asked ” Why are people pulling units off the market?”
You answers are are very generalized, it doesn’t address the fact that active listings spiked to decade highs, and have fallen off just as fast. Sure there could have been weddings, divorces, jobs lost/taken, moves, … yet the planets would have to align for so many of these to affect the numbers so drastically. Statistically its just not possible (BTW I’m an Engineer, so I’m a math geek).
I agree with this answer: “fear the world is tanking”. Better to wait out the storm. This is the sense I’m getting from the market, people hoping for more, not getting it, and deciding its better to just stay put.
I don’t agree with this answer: “Thought we could move up to a bigger house but couldn’t find what we wanted are just a few.” There’s more than enough listings, and I was looking around Kits houses with my GF, there was certainly enough great units available a few months ago.
I’d be interested in this answer: “A guess (I haven’t collated that information, so it’s speculation), is that about 40% to 50% relist within 3 months.” If this were true, we’d see Active Listings level out, instead its still falling.
Chris,
“Active Listings spiked to decade highs”
Yes they did in 2008. Why? If you will recall and I know you do, 2008 was the year the sky fell in. Everybody wanted out but nobody was buying. Don’t you think it makes sense that the Active listings would spike?
“Answers are very generalized” Disagree! Those are real examples, but a survey to nail down the exact numbers doesn’t exist – at least not to my knowledge. This of course drives self proclaimed (with due respect), ‘math geeks’ crazy. Unfortunately, real estate is not a science.
“Fear the world is tanking”: it’s a possibility, but what may be even more possible is that the baby boomers are comfortable. They don’t need nor want to sell but if you tickle them with enough money they could be convinced. Some buyers have a lot of feathers.
“Moving up”: – Sorry bud, we’ll have to agree to disagree. You may know your math, but I know my real estate. Much of real estate has little to do with stats and graphs.
“A guess”: – not so! I think you may have overlooked that a lot of the Active listings actually sell. As for those that come back after a hiatus, many may not have sold at the price during the first period of exposure, but with a tightening market they do in the next round.
BTW I could be wrong but you seem to be comparing YoY which you suggested was bunk. Referring to the graph you will notice that active listings are retreating to previous 07 levels. Take away these cheap interest rates and watch the sales and possibly the prices drop.
I don’t think all the variables in this market have come to the table.