Eitel Insights forecast of the stress test mitigation has come to fruition. June and July 2019 Average Sales Price for Greater Vancouver Detached properties realized a loss of 17% & 18% respectively. That signaled a stress test mitigation.
The stress test was introduced in 2018 and basically cut any potential buyers purchasing power by 20%. Buyers needed to qualify at higher rates and terms than were ever required before. That sent a significant segment of the market to the sidelines.
Now that the market has dropped off, there is a portion of those sidelined buyers that are off the bench and in the purchasing game. During August prices rose back to $1.560 Million, which is perfectly in the middle of the market downtrend that has been established. Equally important the market has jumped back above the ten year uptrend after two months of threatening to break the important technical indicator.
We at Eitel Insights believe sellers should take advantage of this temporary market. We have been stating for the last quarter that this stress test mitigation would come, now that it is in play, we feel obligated to warn that this is a blip in the markets evolution lower. Before you know it the average sales prices will officially break the ten year uptrend and the market will be sent lower with a significant test of $1.400 million likely in 2020.
The Detached sales figures which had broken out of the falling knife trend. Is now, seemingly in a triple top scenario with sales not being able to climb above 920 sales with any sustainability. This will be a short term problem as sales can indeed increase from their very low levels and still be in the overall downtrend. We do anticipate seeing higher lows in the sales numbers and it is not hard to imagine higher lows being put in place considering all the market needs to realize is more than 344 sales to achieve the goal in place. However as we say the market needs to have a heartbeat. Just because there are sales does not give you the whole story of supply versus demand.
The inventory growth has curtailed as of late, with properties staying on the market longer and some sellers giving up hope and taking properties off the market. The new activity brought on by the stress test mitigation will cause another increase in inventory over the next couple of months. As old sellers hop back on the bandwagon believing the market has turned. This will again cause a further imbalance between buyers and sellers. Once the sidelined buyers have purchased there is no pent up demand following them and prices will indeed head lower while inventory grows.
Money save is money earned. Since our initial forecast that the Greater Vancouver Market had indeed topped out and prices would begin to trend lower. The market has realized a $360,000 price loss. For an individual report please visit www.eitelinsights.com.