Vancouver’s Average Price Could Be a False Positive

False Positive

Many wonder if Vancouver will give birth to a dramatic new market of lower affordable prices.

Vancouver Average Residential Real Estate’s September average house prices gently slipped across the line to approximate September 2011 but remains in concert with prices seen throughout most of 2010 and 2011. Comfort is for some, seeing average prices hold relatively steady. This however, may be a false positive if they ignore the other line – the low number of sales!

Average Price 1977 – 2012

Detached

Although it dropped from last month’s $1,142,237, Vancouver’s detached average price is higher at $1,119,166, than September 2011′s $1,104,896.

As reported last month detached Active listings continue to pile up and now total 8,231 – up from August’s 7,875.

Attached

At an average price of $531,311 in September, Vancouver’s attached market segment is down from March 2012′s high of $593,139.

Apartment

September 2012′s average apartment price of $445,429 now almost equals April 2012′s $445,458 but is short of 2012′s high of $461,410 seen in May.

Vancouver Real Estate Average Prices:

Detached Attached Apartment
September 12 – $1,119,166 September 12 – $531,311 September 12 – $445,429
September 11 – $1,104,896 September 11 – $573,259 September 11 – $455,342
September 10 – $1,016,324 September 10 – $534,085 September 10 – $430,712

Vancouver Real Estate Inventory – Active Listings

Detached Attached Apartment
September 12 – 8,231
+ 19%

September 12 – 2,789
+ 10%

September 12 – 7,330
+ 9%

September 11 – 6,885 September 11 – 2,532 September 11 – 6,668

Vancouver Real Estate – Units Sold

Detached Attached Apartment
September 12 – 599
-37%

September 12 – 246
-32%

September 12 – 676
-26%

September 11 – 977 September 11 – 367 September 11 – 922

*Percent = YOY

Photo Courtesy One Geeky Girl

About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

When Life Moves You - contact Larry:

*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

vanpro Says:
October 1st, 2012 at 8:26 am

Key number: sales (1,521) plummett to lowest in last 15 years, even lower than Sept/08 during worldwide financial crisis and when Vancouver SFH prices plunged 25% in 10 weeks. Now overall MOI = 12.1 which foretells major price declines to come LED by plunge in SFH sales resulting in SFH MOI at 13.74 (vs. 7.05 in Sept/11).

Bernie Brunet Says:
October 1st, 2012 at 8:56 am

The sales and listings numbers don’t bode well.
We were lucky enough to own in the Vancouver area from 2002 to 2007, a period of extreme house appreciation. I happily took the windfall when we sold, but I shook my head as we left for Ottawa. It must be BC’s largest grossing crop (legal or not.) that was inflating the prices, was my pet theory. The 2007 USA house crash happened and I was surprised that we Canadians were relatively unaffected. The Spanish crash happened and I was less so. Australia’s house price deflation? Well, it’s way over there isn’t it? But Canada is not immune to human nature. It may not be “technically” a bubble (However you define it) but the psychology of “buy or be priced out forever ” has finally changed. In other words, the “priced out forever” moment has arrived for too many people . When I hear of decently paid cops, teachers and nurses living in rented basements, well prices don’t make sense on the surface, and they still don’t make sense after analysis with comparison to average incomes and rents. I do sympathize with people who bought in the last few years with large mortgages, it’s going to be tough rowing for while. I don’t blame real estate agents, as they are not economists, not legislators or prognosticators of house prices. I do blame the federal government for low interest rates and far too easy access to credit.

Ralph Cramdown Says:
October 1st, 2012 at 9:30 am

Thanks for the numbers, Larry.

Unless people think inflation is running at 1.3%, they should realize that detached prices, while nominally higher than last year, didn’t keep up with inflation.

Finally Says:
October 1st, 2012 at 11:31 am

Looks like sellers haven’t realized there home won’t likely sell unless they drop their price expectations. It’s a matter of time, I just wonder when they will wake up and smell the desperation.

PS. I love your timely stats Larry, please keep it up. Much appreciated!

Been there B4 Says:
October 1st, 2012 at 11:43 am

Hey Larry. Do you honestly believe those numbers? The RE board will do and say anything to prevent the greater fools that are left, from seeing numbers that indicate RE does not only go up. It is only a matter of time before, even the fools realize that Vancouver RE is headed in only one direction. And that is down. Real estate boards and sales people are doing nobody a favor putting forth skewed numbers. Let the market correct naturally. Eliminate the speculation, greed , and mostly the poor fools. These are the people who are going to be hurt the most. The ones who can least afford it. We all know the smart money disappeared from Vancouver RE over a year ago, for the most part. They all know you can only inflate a bubble so large until it bursts.

October 1st, 2012 at 12:50 pm

@been there B4

“Hey Larry. Do you honestly believe those numbers”
- in their pure form – absolutely! Do you have a valid alternative?

“Real estate boards and sales people are doing nobody a favor putting forth skewed numbers”
- would you prefer everyone be mushrooms in dark rooms devoid of all information? I am a messenger of the market. I don’t make the market.

“The RE board will do and say anything to prevent the greater fools that are left, from seeing numbers that indicate RE does not only go up”
- That is a load of BS! I’m going to stand up and tell you that you are out of line to suggest the board has some clandestine political interest in rejigging the numbers for the purpose you imply. While the board as an entity is not without its failings personally I take comfort in knowing that staff take great care to ensure the numbers are accurate.

Be clear in understanding that they are average numbers and as such are subject to skewing – nothing new about – that as it is the nature of an average price – but you know that!

Van guy blazin kush Says:
October 1st, 2012 at 5:33 pm

Larry,

What’s your honest opinion of where we are headed?

October 1st, 2012 at 7:53 pm

@van guy

re honest opinion
That depends! This isn’t a simple fix. My opinion at best would be a guess.

Smoking Man Says:
October 1st, 2012 at 8:15 pm

I believe that, adjusted for population and housing unit growth over time, that we are effectively at about a 20 year low in sales (relative to the above), and interest rates are at lifetime lows.

So this is what uncharted waters look like.

I say we’re in for a doosey of a bear market. Likely the worst ever.

Life will go on.

October 1st, 2012 at 8:49 pm

@smoking

Life will go on – Indeed it will!

CBM Says:
October 1st, 2012 at 9:26 pm

Clearly my prediction of offshore buyers returning in the fall is coming true. The high average is a reflection of the fact that large amounts of high end housing is selling and selling well.

Like I’ve said all along, this is just a brief pause before the Mainlanders return again. Clearly the high end of the market has not been impacted.

October 1st, 2012 at 9:57 pm

Thanks for the early look at the numbers, Larry…

To both Larry @yattermatters and @been there B4

Now, just for 2012, can we please please verify the Board’s numbers with those that must be compiled by the BC Land Titles Office. A sale should result in a transfer of title, albeit with some time lag.

As an aside, looking at the Average Prices and number of Sales for REBGV, my spreadsheet shows the TOTAL DOLLAR VOLUME for the three housing types has PLUNGED from a high of $3.21 Billion in March 2011 to a low of $1.20 Billion in August 2012. Looks like September 2012 could be even lower.

If this decline continues, I expect to hear from the new Minister of Finance that the Property Transfer Tax revenues are down a lot and making the provincial deficit even worse.

October 1st, 2012 at 11:30 pm

@lookout

can we please please verify the Board’s numbers with those that must be compiled by the BC Land Titles Office

You just have yourself a good time going to land titles and spending your time to do and pay for those searches. I recognize my limitations and would rather show houses with qualified buyers. :)
While there, don’t get confused by the difference in the sales types. Remember that the board only records MLS sales not the transfer of the property title which will include private sales.
Also consider how you will record ‘sales totals’ that don’t reveal assignments where there may be only one title transfer but two or more ‘actual sales of the paper’. That’s a whole other can of worms and I just know you will have fun with that one.

As to the property transfer tax that is one of many domino issues that will result from the markets price correction/lack of sales. Think about the reduced property taxes, from which schools, transit and municipal services are paid. The multiplier of this market change will affect us in many more ways including sales of furniture, appliances, window coverings, flooring, as well as cars and services provided by carpenters, painters and electricians. Some of these people who provide those services or products may find fewer income earning cherries in the global pie which in turn reduces the number of people who might buy a home.

Thanks for listening.

Maurice Says:
October 2nd, 2012 at 9:46 pm

@CBM

HAM is coming, keep dreaming. We are looking at decades low sales numbers in Vancouver, if the HAM phenomenon ever really existed, it will take a mountain of it to save this market from a very hard landing. Even the mainstream media is on to it:

http://m.theglobeandmail.com/report-on-business/economy/housing/tighter-mortgage-rules-start-to-take-toll-on-high-end-homes/article4583509/?service=mobile

thetamax8 Says:
October 2nd, 2012 at 10:52 pm

Hi Larry:

Regarding the domino effect you mention above (taxes, spending on furniture, etc.).

That’s one of the biggest concerns I have about this whole generation of brainwashed RE “investors”. The economy can only go on for so long with such a large amount of private / individual investment tied up in assets purchased at hugely inflated values (relative to their rate of return or growth in the rate of return)

Ideally, we (the collective we) would have taken the large $ from foreign buyers and invested it into more productive investments / businesses that generate INCREASING incomes. However, we squandered this opportunity by joining the party by taking on even more debt to swap houses back and forth amongst ourselves.

At the end of the day, people have lost sight of the fact that for an investment to increase in value you need one (or both) of two things:

A) Increasing earnings generated (i.e. future earnings flowing through to cash); and/or

B) Decreasing discount rate at which we derive the present value (of those future earnings / cash flows)

Unfortunately, most of this generation has no concept of this. As an example, when asked why they would buy a condo that “yields” so little rent return, the most common response is “but I’m counting on capital appreciation”.

They have no idea that’s where the term “greater fool” came from – the need to find an even bigger fool to take it off your hands. Thus, at these prices everyone is a speculator – whether they know it or not.

So, back to the point about the “multiplier”. Yes, it will have a large negative impact…but it’s our own fault for building up those “economies” on a house of cards….

trashy Says:
October 2nd, 2012 at 11:00 pm

From a technical perspective all prop classes especially SFH and attached are showing a classic head and shoulders pattern. After head and shoulders comes knees and toes. (knees and toes!!)

YVR2ZRH Says:
October 3rd, 2012 at 7:27 am

I’m going to agree slightly with @CBM. In the latter half of the month, the sales posted were showing odd results. Sales on West Side spiked and the average price for West Side also spiked. We also saw a large number of higher priced homes in Richmond (2.0M plus) sell. This has occurred after significant price reductions from asking but it was a noticable change.

@thetamax8 – You are correct. Asset value increases for 2 reasons – increase in future income or decrease in discount rate. We have seend the second going on for so long and now this is over. The first – - well? Incomes are not rising and neither are rents so – we can draw some good conclusions from that.

vanpro Says:
October 3rd, 2012 at 8:12 am

Yes, it turns out to be near 20 yr low in sales for Sept. Adjusted for population difference b/w Sept/12 and 20 years ago, this is disastrous!

October 3rd, 2012 at 12:02 pm

@thetamax…

You raise good points, I would add one more item to your two that have an inflationry iimpact on asset prices and that is the interventionist policies of the central bankers and governments around the world.

Specifically, the efforts by most of the central bankers to provide easy money to create a “good feeling” in the minds of the general populace. So everyone feels good but as we all know nothing is free forever. Home ownership in Canada is nearly 70%, there are no more net new buyers left, so sales must plunge and price declines follow. So a low interest rate policy eventually becomes ineffective at holding prices a these levels.

The parabolic rise in house prices from about 2000 was a direct result of easy money made available by the central bankers to just about anyone who wanted it. This was done deliberately.

But, when stimulus is provided over and over again, the “market” becomes addicted. Just witness the multiple and now never ending Quantitative Easing in the biggest debtor nation in the history of the world, yup the USA. In the short space of about four years the market sees QE for what it is, a DRUG that provides a temporary high.

These policies are a poor substitute for what’s really needed and that is an investment climate that allows risk takers and entrepreuners to create new businesses which in turn spur new demand, more jobs, i.e. a virtuous cycle.

vanpro Says:
October 3rd, 2012 at 1:17 pm

lookoutbelow: I agree totally – and another extreme example of ineffective money printing and zero interest rate policy (ZIRP) for last 2 decades is Japan subsequent to their real estate bubble imploding in early 1990′s….

Jason Says:
October 3rd, 2012 at 2:07 pm

@lookoutbelow

Thanks for posting those $ figures. Now I am curious how much of that would have gone to Realtors as commission, how many Realtors are in Vancouver and thus how much the average Realtor is losing in income due to this fundamental shift

October 3rd, 2012 at 9:50 pm

@jason

“how much of that would have gone to Realtors as commission”

of what significance is your question to the discussion? Family Hyaenidae perhaps.

Been there B4 Says:
October 3rd, 2012 at 10:34 pm

“The RE board will do and say anything to prevent the greater fools that are left, from seeing numbers that indicate RE does not only go up”
- That is a load of BS! I’m going to stand up and tell you that you are out of line to suggest the board has some clandestine political interest in rejigging the numbers for the purpose you imply. While the board as an entity is not without its failings personally I take comfort in knowing that staff take great care to ensure the numbers are accurate.

I am glad you have so much faith in your industry to put forth open honest numbers. It appears that you are one of the few. Even the mainstream media is reporting how desperate the industry now is, to squeeze out every last dollar from the greater fools.

http://business.financialpost.com/2012/10/03/as-housing-market-slows-industry-scrambles-to-paint-positive-picture/

Jason Says:
October 4th, 2012 at 12:43 pm

Sorry Larry I guess I went off topic here but I can’t hide my fascination on what some of these trends may do to the broader economy. Realtor income is just one potential change that would come with lower sales numbers. Anyone else who profits on a real estate transaction is likely starting to notice, yet nobody seems to talk about it.

vanpro Says:
October 4th, 2012 at 2:36 pm

Larry: thanks again for the timely publication of your stats – and I particularly like the format of your summary (separating out detached, attached and apartments).

BTW: any “coffee talk” or other market sentiment you are hearing lately?

October 4th, 2012 at 3:52 pm

@been there
“I am glad you have so much faith in your industry to put forth open honest numbers. It appears that you are one of the few.”

- it pays to be different :)

Smoking Man Says:
October 4th, 2012 at 7:38 pm

In the latest Financial Post piece (different from the above) they discuss is this a bubble or not. They have a graph of Vancouver rents vs. prices.

It is startling. In the years ahead, people will wonder how the masses could have been so foolish.

As always, everything will return to fair value, however briefly.

Best,

Smoking Man

vangrl Says:
October 4th, 2012 at 7:39 pm

thanks for the numbers Larry!

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