The perfect storm of historically low inventory coupled with immediate demand for larger accommodations and ultra low interest rates is beginning to fade from the current market behaviour. Consecutive months of record setting new listings data has the inventory levels on the rise. Resulting in home values which had been exponentially increasing is beginning to slow.
Active listings have risen over 46% in the past two months. From the total inventory of 3,126 in February 2021 to 4,588 during April 2021. The sudden rise of inventory has led to a break of the initial downtrend (red trendline). As the available properties continues to rise throughout the spring and into summer months prices will likely begin to move sideways. Eitel Insights looks for the inventory to challenge the next downtrend (yellow trendline) which implies inventory rising to 5,700 during the peak months of 2021.
Home values did increase once more but the average price was only able to increase by $14,000, the lowest price increase since May of 2020. Home prices during May 2020 were averaging $1.586M, by March 2021 the average price had increased to $1.958M. That increase implies an average growth of $37,200 each month over the previous 10 months. The nominal price increase of $14,000 from March 2021 to April 2021 rose the average price for a home inside of Greater Vancouver to $1.972M, just shy of the illustrious $2 million price bracket.
Evidence of the average sales potentially reaching the near term highs is the data that comes from the advancing declining stats. When comparing the individual 20 areas which make up Greater Vancouver. Using a month over month comparison the past month of April realized 9 areas inside of Greater Vancouver where the average price increased, but had 11 areas declined. That marks the first instance, over the past year, where the declining areas outnumbered the advancing.
As home values begin to reach their apex of the growth phase, the inevitable ebb to the recent markets flow, will result from the rising inventory environment coupled with stricter lending policies and an interest rate that is no longer at historically low levels. The natural barrier of $2M for the average home in Greater Vancouver will likely hold as a new artificial ceiling.
The possibility of a 8-10% correction after the peak occurs is realistic. That would imply a retests the previous market cycle high of $1.830M. To expect prices to correct below the previous channel is an unlikely outcome. More likely is an evolution out of the growth trend which increased home values over $386,000 to a period of sideways action, as price discovery confirms the previous technical break out.
Clients and followers of Eitel Insights analytics will remember our initial published article in 2017 using technical indicators to call the top of the Greater Vancouver housing market. Subsequently the home sale prices corrected 20% during 2019. The upcoming sideways action will not likely result in a major correction as the last cycle offered. Reason being the Bank of Canada created the artificial floor to home values when they instigated the the Canadian Mortgage Bond Purchasing Program in 2020. (See past article for details regarding the CMBP)
Sales continued at a high pace during April with 1,667 completed transactions occurring. Over the past two months the sales achieved over 3,600 deals. That many transactions in a two month period has only occurred during 2015 and 2016 frenzied market conditions. Key thing to remember all good things come to an end. Homeowners looking to capitalize on the high priced environment may want to list sharply. As the inventory continues to build some of the exploitative tactics that are working for sellers may be coming to an end.
As individual markets vary across Greater Vancouver, get in touch with Eitel Insights to find out how much your property holdings have increased over the recent run up. Become a client to receive actionable intelligence based on analytical interpretation.
Dane Eitel, Founder and Lead Analyst,
Record Breaking Month in Greater Vancouver for Home Sale Prices & New Monthly Listings
Yet another record month for the Greater Vancouver housing market. The average cost to purchase a detached property inside of REBGV increased by $89,000. Bringing the average to $1.958M. This was aided by the continued high sales totalling 1,973. Accumulating the second largest sale total in the history of Greater Vancouver real estate. In attempts to capture the newly minted growth phase in home prices, sellers came to the market in droves. Setting the new record with 3,368 newly listed detached properties in March. The record amount of activity to kick off the spring market is likely to continue as March through May are typically the busiest months of the year.
Home sale prices continued their escalation beyond the previous market cycle. Amazingly, another $89,000 was added to the average sales price from the previous month. The new record price of $1.958M represents a 7% gain over a two month span. The 7% growth is the first increase above the previous market cycle which had held home values range bound for 5 years.
The biggest gainers this past month were Pitt Meadows up an incredible $233,000 month over month, representing an astonishing 20% increase. The average property in Pitt Meadows is selling for $1.44M. Vancouver West rose $500,000 up 14%, bringing the average price to $4.025M. The standout of the gainers over the past two months is Whistler. This past month over $600,000 was added to the average price. Couple that with the $900,000 increase from the month previous, and Whistler has increased over $1.5M in just the past two months. The recent spike in value has increased the averages price to over $4.325M for a detached property in Whistler. The massive increases to these areas have aided the REBGV average price to gain distance between the price point and the aggressive uptrend instigated during July 2020.
Breaking beyond the 5 year price boundary has been clearly aided by the supply demand imbalance. March 2021 just recorded the second largest imbalance between the two market metrics on record. The total gap between the supply versus demand during March was 3.6. Falling just 2 basis points below the all time high which occurred during March 2016 with a 3.8 gap. Interestingly, previous to the past month the second largest discrepancy occurred during April 2016. This implies buyers are unlikely to receive any reprieve in the short term.
As forecasted over the previous months, sellers are entering the market with full force. A record setting total of over 3,300 properties were listed in last month. March 2021 represents only the 4th instance where new listings accumulated over 3,000 in a single month. Should the high new listings count continue to rise through spring and into the summer months, home values will likely realize a near term price peak during the summer.
Even with a record amount of new listings, the total inventory continues to remain in the doldrums of the chart. A glimmer of hope would be the total inventory of 3,886 is attempting to break out of the 3 year immediate downtrend (Red trend line). Established during June 2019 when there was over 6,700 active listings. The enormity of new listings only resulted in a net of 880 total active listings compared to the previous month. However should inventory continue to grow a the 29% as was the case in March. The key figure of 5,700 active listings is well within reach by the late summer, or early fall.
Sales fell just short in completing a trifecta of records during March. The 1,973 sales were only 177 shy from the all time high achieved during March 2016 of 2,150 sales. With the abundance of new listings coming to market, the buyers snatched up the choice properties, and continued in the bidding war mentality which pushed the average sales price to over 101% of the asking price. This is only the 9th instance in which sales price was over 100% of the asking. Of those previous 8 instances they all occurred between December 2015 – July 2016. Implying the next several months of data could result in a continuation of the sales prices being higher than the asking prices.
Importantly, all subsections of the market are now selling. Over the past year the entry level homes have been selling at a frenzied pace, that has worked all the way up to the luxury market. March realized 49 properties that sold over $5M. The 49 sales is an increase of 250% compared to the preceding 3 year average of 14 sales per month. The prices of the luxury market is still not quite back to the peak conditions of 2017. As the averages sales price was $8.6M. However the average sales price in March of $7.6M, is up over $1.6M from the low recorded in May 2020 of $6M.
Founder & Lead Analyst
There have been clear success and failures in the real estate market during the pandemic but the general backdrop is good according to Vision Capital CEO Jeff Olin.
“Not withstanding the increase in interest rates, the spread between the capital yields in REITs and in investment grade bonds has been almost double the long-term trends,” Olin said. “And when you can make little or no money on bonds, the thirst in the private market for property is extraordinary.
“According to Citi, there is $345 billion of dry powder funded in Blackstone, in Brookfield, and in pension funds that are increasing their weights to real estate from five to 10% to 15% to 20%. Private equity funds that have been fully funded are looking to invest in property, and so that’s a very good backdrop for the public markets.”
To illustrate his point, Olin highlighted Vision’s participation with Blackstone on an investment in Tricon – focused predominantly on… CLICK for the complete article
You can also watch Jeff Olin’s 2021 World Outlook Financial Conference presentation HERE
A typical real estate investment can easily produce a return of 15% – 25% depending on the appreciation and the mortgage pay-down (these are generally the two that recognize the highest returns). There aren’t a lot of investments that can say they generate these kinds of returns, especially with relatively low risk (if done right!).
CLICK HERE to download the FREE Investment Guide from the Green Mortgage Team
The decade long term trend of urban home owners taking advantage of the price differential between city and small town pricing has been further accelerated by the desire for more space and land in the pandemic and post-pandemic age.
As Frank O’Brien detailed in his recent Business in Vancouver article, the data is clearly showing a surge in urban buyers seeking BC acreage, waterfront and small community living. In addition, some buyers are also seeking recreational and income-generating properties – and a key market driver being that these buyers are coming from across Canada.
The fact that this is not a new, but an accelerating phenomenon, can be seen from some fascinating 2019 data reported by Better Dwelling. Of the 45,000 people who left Greater Vancouver that year more than 70% moved to smaller communities in BC.
So the big question for those still considering a move or purchase to escape the trials of packed city life – where are prime properties still available and are there reasonable values to be had?
One answer is the East Kootenay’s and the communities of Cranbrook, Kimberly, Fernie and Creston. Tucked away in the south east corner of the province this part of BC has lagged behind it’s Okanagan neighbour when it comes to attracting tourism and recreational visitors. Of course the benefit is that it has not suffered the price surge, development or growth woes of the Okanagan valley either. But it only takes one trip to discover that the East Kootenay’s are an amazing combination of the best of BC wine country and the best of the Rocky Mountains combined.
Whether you’re considering retirement, a second home in the country or an investment property – you’d do well to look at this area. For more details and some specific opportunities currently available CLICK HERE.
Nina Parente is a broker and real estate advisor with Rennie & Assoc.