Canada’s real estate sector is making a shift. Statistics Canada (Stat Can) data shows FIRE sector jobs made a small decline in June. The aggregate movement was small, but most of the gains are being made in smaller provinces. Larger provinces like Ontario and Quebec lost thousands of jobs in the sector last month.
The finance, insurance, and real estate (FIRE) sector is the industry of buying and selling homes. The industry booms when asset prices rise, and/or more interest payers are added – i.e. more credit is issued. It suffers when asset prices fall, or credit growth starts to slow down. The sector becomes more important as manufacturing jobs disappear. Yes, the business of warehousing people replaces the business of producing goods. Debt driven economies, such as Canada, are increasingly dependent on this sector.
Canadian FIRE sector employment is virtually flat from the month before. FIRE seasonally adjusted employment fell to 1.193 million jobs in June, down 0.02% from the month before. This was the first monthly decline for June since 2014. The decline works out to 200 jobs, so not nearly as bad as May – when 2,300 jobs were lost. June’s movement was small, but some provinces were luckier than others….CLICK for complete article
2 decade low in sales, prices are down $320,000 and testing the 10 year uptrend for the second time in 2019. Not great news but information you need to know.
Real Estate Market Update Detached Release.
During our current market cycle the first test of the uptrend occurred in Feb 2019 when the market lost $165,000 from the month previous. That was significant as it broke the middle threshold of this market cycle. The market decided $1.610 Million was not the bottom of the cycle. That decision was so forceful that the market dipped its toe below the 10 year uptrend. The drop experienced was too significant for that period of time and the market was not prepared to actually break the ten-year positive trend. As a result, the market quickly shot back up to where it felt comfortable around the middle threshold. Since that price point is no longer in question, the market is forced to head lower. In June the Average Sale Price was $1.510 Million and is the most recent test of the ten year. This could represent a positive in the short term.
What we believe will transpire over the remaining months in 2019 is a somewhat tight selling range, with properties selling above the ten-year uptrend and below the upper most downtrend line. This behavior will ultimately result in a break to the 10-year uptrend in early 2020 and retesting the $1.400 Million threshold. If that price point does not hold as a bottom, the next price point tested will be $1.225 million. Since 2009 the staunch uptrend has been tested 6 times and always proved to push the market higher. This trend will come to an abrupt end before the start of Q2 in 2020.
Sales have all but dried up. In June 2019 only 761 detached sales took place, marking the lowest point since 2000. May and June are usually the highs in regards to sales in any given year. This gives us reason to believe the market will continue to see lower price points as we go forward in time.
While inventory will continue to climb and competition amongst sellers will intensify, properly priced properties can achieve sales, as a small segment of buyers have realized enough of loss and have a great enough need to purchase in a timely fashion. However, the “proper price” on an individual property basis is decreasing. The gap has narrowed between a price drop vs a stress test decrease in mortgage qualification. Those buyers who have a need to upgrade are in a stronger position to move forward with a purchase.
Worst June for the Greater Vancouver Condo Market in Decades. Paltry Sales and prices down over 100K
Real Estate Market update Condo Release.
Prices have dropped over $100,000 since the market peak currently around the middle threshold of this Market Cycle. While the ten year uptrend bottom is far from our current price point of $643,000. The top of the ten year trend will be tested in the near future. As when the market exploded after breaking above the ten year the re-entering of the trend will be equally volatile. After the attempts to stay above the uptrend fails the market will fall hard in price point (ex. Detached market fell when it broke the middle threshold). Ultimately the condo market will test $525,000 as a potential market bottom. A total of 30% correction from the peak of $750,000.
Why do we see the prices ever lowering? The old adage of Supply demand. The demand is nowhere to be found. For the first time in decades we have experienced a June with less than 1000 condo sales in Greater Vancouver. The sales totaled 946 condo sales in June, which is usually a busy time of year for condo buyers and sellers. Not so in 2019, the paltry sales totals and the strong down trends will only be exacerbated by the ever increasing total to inventory.
The Condo inventory is continuing to grow at a rapid pace. This will continue to intensify as we see more and more pre-sale buildings coming to completion. With those pre-sale buyers already flooding the private listing market with assignments. Once they receive occupancy the market will experience a major amount of inventory supplied to the market thus beginning the cannibalization of the condo market. Ultimately we believe the average price for a condos will bottom but before then the market will experience all-time high in the available inventory for the condo markets.
Dane Eitel is the founder and lead analyst of Eitel Insights. Click here for more information.
Home prices across major metros in Canada ticked up 0.5% in May from the prior month, the slowest rise for any May in the 21-year history of the Teranet-National Bank House Price Index. “If seasonally adjusted, the index would have been down 0.4% on the month,” the report said. But real estate is local, with wide variations from market to market, and so here we go.
In Greater Vancouver, house prices, instead of rising seasonally, declined 0.2% in May from April, the 10th month in a row of declines, according to the Teranet-National Bank House Price Index. The index is down 5.0% from the peak in July 2018, the sharpest 10-month decline since July 2009. And it’s down 4.1% compared to May 2018…CLICK for complete article
This one was suggested by our friends at Hawkeye Wealth.
The uncertainty associated with real and potential trade wars is having an effect on our economy. While tariffs’ relationship to real estate is not apparent, the impact on commercial real estate (CRE) is real….CLICK for complete article
Eitel Insights: May’s average sales price was $1.586 for Greater Vancouver’s Detached Market. The lowest such price for May in the past 5 years. Far from the peak of the Market in May 2017 when prices were at 1.830 Million.
As Eitel Insights has predicted the downtrends have taken hold of the Greater Vancouver Prices, and we will be continually testing previously established prices until the market bottoms likely in 2021 at either a 24% – 31% total correction.
Eitel Insights: The amount of available inventory continues to climb causing more of a competitive climate for sellers to achieve a sale. May 2019 saw 6771 active detached properties across Greater Vancouver, compared with only 4830 in May of 2016.
The inventory is in a strong uptrend with listings growing each quarter.
Eitel Insights: Yes, the sales numbers increased to 918 detached sales in May, the most in the past 12 months. However far from the peak of our spring in 2016 when in March sales were at 2150, and in May of the same year sales totaled 1873. A “properly priced” will always be able to achieve a sale, but the proper price is ever decreasing.
The demand has fallen off a cliff as the attached charts demonstrate. Also notice the downtrend in sales is sharp but there is a longer more prolonged downtrend that will force the market lower after this short term bump in sales comes to an end.