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Sales Prices Begin To Trend Down in REBGV

Over the last month average sales prices across the Fraser Valley Board and the Real Estate Board of Greater Vancouver have been pretty stable. By stable I mean that they’ve ranged between $660,000 and 669,000. In fact, with the exception of a few blips that’s where average price has been since the beginning of the year.

The REBGV average price has been pretty stable all year. The FVREB price, on the other hand, has moved around a bit more. It took a bit of a dive at the beginning of the year, bottoming out around mid-February. Since then, however, it’s been climbing steadily.

How can average prices for both boards be stable if the FVREB is clearly climbing? There’s only one answer, isn’t there? REBGV prices must be sliding. And indeed, that is what is starting to happen. As of the beginning of April the trendline has started to decrease, ever so slightly, granted, but it is dropping. My figures show it topping at $757,255 on April 2, and dropping to around $747,000 now.

What does this mean? First, it’s not much of a trend change. Prices are still pretty stagnant. However, a drop in prices may lead to a bit more inventory being used up while at the same time discouraging new listings (who wants to list speculatively when the market is stagnant?) We’ll see if this pans out within 10 days when we get the inventory figures for April. The question in my mind is whether inventory for 2013 will mirror that of 2009, or if it will more closely follow 2008, 2010, 0r 2012.

2008, most will recall, saw record inventory levels and a price drop approaching 18%. 2010 again saw a big bump in inventory, even if prices reacted less than 2008 (there was less fear everywhere in 2010 compared to 2008 anyway). 2012 saw an inventory increase that was second only to 2008 (in other words, the second highest inventory for the REBGV, ever), and it happened even faster than 2008.

2009, on the other hand, was a slow, slow digestion of the record inventory we saw in 2008. It took all year to reduce inventory by roughly 4,000 active listings, from a starting point of around 16,000.

I believe that prices are likely to stagnate no matter what unless we see a big move upwards in interest rates. Right now we can renew 5 year closed mortgages for 2.99% without even trying. However, I think the chances of seeing a long term soft landing (as opposed to a crash) are improved if inventory drops. It’s kind of a moot point – lots of unmotivated sellers aren’t a lot different from fewer unmotivated sellers, but if the hyper-attention we’ve seen directed at real estate in Vancouver dissipates slowly rather than rapidly it’ll be easier on everyone. A real estate crash, whether you think speculators deserve punishment or not, won’t help many people.

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