Down the Drain
Speculation is rife that Vancouver real estate is sliding down the drain.
Wondering, YatterMatters Tweeted this question: “With thousands of listings on the market why are Vancouver home sellers selling?
In what seemed like the mere passing of seconds came a response that wasn’t from a Vancouver home seller.
“The rats are leaving the ship” followed by this adjunct saying, “I am fairly confident this is (partly) what is going on. Can’t wait to pick up the wreckage…“
Bold Buyer Statement
These words are bold! So bold that you begin to question if these words are representative of a current mind set for Vancouver home buyers. If so, what does this foretell current Vancouver home sellers and does this mind set explain ‘in part’ the limited number of Vancouver home sales?
My surprise at reading these words rests in the fact that I am acquainted with the respondent in real life. The words “can’t wait to pick up the wreckage” seemed at odds with the person whom I respect as a thoughtful, well published local economist. What I didn’t anticipate was the fierceness of their words carrying a tone of carnage. It was something I had not anticipated!
The words generated a lingering visual image of a feline that exhibits immense patience as it waits, ready to pounce on its next meal. As a parallel, one asks if today’s home buyers are like that cat in the picture? Are they silently and patiently waiting – ready to pounce? These brutally honest words left me to wonder if this is the real reason for Vancouver’s real estate market malaise?
Is This Market as Bad as This?
Recorded history is wonderful. It lends perspective to the ‘how bad is it’ question. Using the month of May as the focal point for Vancouver, these market landmarks from the Greater Vancouver Real Estate Board revealed the following:
|Month||Units Listed||Units Sold||Active Listing||Average Price|
What’s the Fuss?
Looking at these historic market landmarks at first glance it doesn’t seem as bad as that which some portray. Units Listed in May 2012 (3056) are only slightly higher than May 2010 (2950) – mere weeks after all the feel good Winter Olympic hype and highs. The difference in number of Units Sold during these two periods also does not seem overt – 1,184 in May 2012 compared to 1,243 in May of 2010.
Active Listings in May 2010 – 7,368, were just under 10% of May 2012′s 7,577 whereas Active Listings in May of 2011 were 20% lower in the same period of 2012 – this at a time when prices rocketed to new highs.
Average Prices recorded show us a 10% difference between these two periods – May 2012 recorded $1,073,311 and May 2010 was $955,348.
It wasn’t until September of 2010 that Vancouver average prices topped the $1,000,000 mark. It was in May of 2011 when the Average Price reached the second highest level ever recorded. To date the highest Average Price of $1,235,244 was recorded by the REBGV, and occurred in February 2012. Average Prices haven’t seen the underside of a million dollars since that day in September of 2010 but, it is getting close and it may soon be time for an updated notation.
Is today’s market really that bad? If you think so consider that in April and May of 1990 Active Listings exceeded 10,000. Sales during those two months were respectively 1,008 and 869 with interest rates hovering above 14%. That dear reader, was a market in which you had something to shout about. That market continued for a year and more with relief only appearing in the spring of 1991 as Average Prices bounced around the mid $260,000 range until 1992.
That was then so to gain perspective let’s start at the highest average price ever reached in Vancouver for a detached home – a mere $1,235,244. Now let’s also assume this market is on the skids sliding down the drain faster than we think to bottom out at something most of us would not imagine – a market that drops so much it hits May 2009′s Average Price of $831,171.
With a price drop of $404,073 that cat waiting for lunch probably has a tail that is twitching ever more rapidly as it begins to think supper is around the corner. As a Vancouver home buyer you too might be a little twitchy as you begin to think this 32% drop from the all time high is your opportunity to finally make the move to purchase a Vancouver home. You might even begin to think that acquiring a home is now a bargain and that it is time “to pick up the wreckage”.
There are no ‘eureka’ moments that determine when a market has hit the bottom. That is only confirmed months later. Accordingly, there is also no particular moment that screams out to you saying it is time “to pick up the wreckage.” In contrast it is more likely that it will be a culmination of subtle factors that determine your home buying action.
Except for a few folks the act of buying a Vancouver home is very unscientific. Rather, it might be as simple as reading the newspaper with a byline claiming that the market has turned. It might be a story at a cocktail party about somebody who was bold and got a good deal. It may be the doctor telling you to get ready for an addition to your family. It could be your acceptance of a new higher paying job. It might be a Vancouver Realtor® telling you that in a coffee talk with his Realtor® buddies it was concluded that based on the volume of phone calls, email/txt inquiries that the market has reversed. It could also just be a sunny day.
Although a drop of 32% in and of itself would be considered great motivation, what is unlikely is that the reason you decide to buy a Vancouver home is based solely on that number. In real life terms your decision to buy a home will be made because it is right thing for you to do now. Then again, as a Vancouver home buyer the determining factor in your decision to purchase may be rooted in nothing more than the desire to rid yourself of an annoying twitch acquired during your wait.