It’s that time of the month. The Real Estate Board of Greater Vancouver has released their stats package to the media. Those who really want the info quickly have already seen it. What follows is my take away.
First, how did @VictorY_Wong do with his prediction?
my projection for May sales for both Boards: 4450
— Victor Y Wong (@VictorY_Wong) May 27, 2018
Exactitude depends on how you count the numbers, so small variations are to be expected, but the FVREB reports 1,758 sales and the REBGV reports 2,833, for a total of 4,591. Victor was wrong. He under-estimated. And the best part? His first prediction was closer!
my projection for May for both Boards: 4600 sales
— Victor Y Wong (@VictorY_Wong) May 20, 2018
He was within 9 units told when he started. Not bad. Much closer than my prediction:
I'll take a flyer and say we're going to see an uptick and break 5000. And that's based on absolutely no analysis whatsoever.
— Rob Chipman (@VancouverREStat) May 20, 2018
OK, so what can we make of the REBGV stats release? Sales were up in May 2018 when compared to April 2018, but we’re way, way off May 2017 – 35% lower than last year and 20% lower than the 10 year average for May. That can’t be a surprise given the list/sells we’ve been seeing and the incremental growth in inventory.
We’re adding inventory. We listed 10% more in May 2018 than we did in April 2018, and 5.5% more than in May 2017. These numbers are much smaller percentage numbers than the sales differences, but they don’t need to be big to make a difference: lower sales and higher listings work together to build inventory, and that reduces demand relative to supply. Price growth slows (or reverses completely) as a result.
Where is inventory? Depending on what exactly you count it’s between 11,000 and 12,000 units. The press release puts it at 11,292. That’s almost 40% higher than last May, which is significant, and it’s 15% higher than April, which is more to be expected.
But importantly, it’s still about 17% lower than the 10 year average inventory for May. We know real estate prices are sticky on the way down. Below average inventory is not going to overcome that stickiness. It’s just not enough.
REBGV president Phil Moore observes the it’s important to prove your home competitively in order to get a successful sale. I won’t criticize him much on that. It’s a press release, and he has to say something. The fact is, however, that we live in the information age. Buyers may be a little on the ignorant side when they first enter the market, but they soon become very well educated. Every seller has to be priced competitively in order to sell. It is demonstrable that fast sales, measured by low DOMs, are always the result of competitive pricing.
That looks like a list price close to and often below sale price. I report on the number of sales at 7 DOMS or less, but realistically you can count any sale of 10 DOMs or less as being sold as soon as it hit the market. One of the easiest relationships to see when leafing through sales is DOMs to over-list sales. A big difference between LP and SP always comes with long DOMs, and that’s because buyers know what’s going on.
Sales volumes are down. Detached and townhouse sales are off 40% year over year, and apartments are down 30%.
Prices on all of them are up: detached are up 2.4% YoY, townhouses are up 16%, and apartments are up 20% YoY. It’s a tried and true cliche that a trend is a trend until it stops being a trend, but the trend of detached properties stagnating while attached properties increase in value cannot last too long. Houses either have to take off again or attached properties have to slow down, and perhaps even retreat.
I suspect the less expensive parts of the market that have continued to increase in value will actually see price reversals. Remember that with strata every new development creates a newer, shinier property. Developers are probably able to react to changes in the market better than individual late entrants (developers are building today on property they bought 1-2 years ago, remember). New units that don’t sell will get re-priced, and will sell very well compared to older re-sale attached properties. Re-sale houses will retain value better. (What do I know? Probably nothing, but ask the guys who called me an idiot back in the mid 2000s for arguing against a crash. You heard it here first).
Which do you think will happen?