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In the Eye of the Storm: Vancouver Real Estate Detached Market

As the eye of the storm is eerily calm, so too is the Greater Vancouver Detached Real Estate market. Largely thanks to historic government stimulus. Just a heads up, the stimulus, draws nigh. CERB is coming to its conclusion, the deferred mortgage program is ending, and evictions have returned, now let’s see where the market will head on its own volition. Hint, down she goes

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The average price for the detached market in Greater Vancouver was 1.638 Million. Technically speaking this is the 20th data point since 2016 that has been around the middle threshold of 1.580M – 1.640M. What that signals to Eitel Insights, is this middle threshold is worn out. With over 30% of the data out of the last 58 data points resulting inside of that narrow 60 Thousand dollar band. Our interpretation of these multiple clusters is that prices have exhausted the middle threshold. The next challenge to the Greater Vancouver market will be to find the market bottom (likely at 1.40 Million during 2021), then consolidate that base price. Once that market has accomplished these herculean feats, prices will begin to rise. After the base, Greater Vancouver market will begin to climb, the middle threshold will be broken like water going through a tissue. As there have been multiple test of the threshold on the way down there will not be much need for sustained price tests on the way back up to the peak echelon.

Inventory has continued to grow, and August resulted in 4800 active listings. The highest level in the past 10 months however was still staunchly lower than the 15 year average of 6000 actives. At the current levels the inventory has 2000 less properties than 2018, but the average sales price is only 13 thousand dollars higher. That implies not too many are choosing to be selling their property during this time. The properties that are on the market are more than likely “need based sellers”, which as Eitel Insights has forecasted will continue to rise. One example of why there are less sellers than two years ago. The market was still considered by other analysts to be a hot market, listings were high as Realtors told sellers they could name their price and a buyer would pay it. That possibility never actually transpired, what did occur was a cancellation many listings, based on the Realtors advice that next year will be better, wrong again. Here is one example property out of many examples had listed for a pie in the sky price during previous years. A property listed in 2018 with a 1.658 Million list price, never sold, relisted in 2020 at 1.378 Million and sold for 1.285 Million. Want another example? Here you go, 2017 list price of 5.288 Million, 2019 list price 4.788, price reduction down to 4.388 Million, another reduction to 4.25 Million. 2020 list price 4.099 Million, sold for 3.80Million.

Would either of those properties have continued to chase the market lower unless there was some kind of a need to sell? I doubt it. This need to sell will continue to permeate throughout the detached market.

Sales ticked lower in August with 1108 sales, compared to July which had 1134. With the sales escaping the identified channel the past two months, we anticipate the data to return lower as the economy will be on its own, without the aid of any government buoys. The government did everything to halt the economic impact of Covid-19 across Canada, especially in the two largest real estate markets (Toronto & Vancouver) now that the government’s intervention in to the free market is coming to the end. The forthcoming data will continue to under deliver in upcoming quarters, now that folks have to go back to spending money they earn rather than spending the handouts.

After the anemic sales during April and May, the sale surge during July and August, should not come as a huge surprise. Taking all of the past 5 months of sales into consideration, April 393, May 544, June 873, July 1134 and August with 1108, the average is 810, when compared to the previous 2 years the average is good. However as you will remember, Eitel Insights has stated this market has been falling off since peaking in 2017. The 5 year average of sales during the 5 month span is 1163 sales indicating the 810 to be less than stellar.

Yes, we are aware that interest rates are low, but now that the governments have moved off of the standard 2% inflation target, I do not see any real panic to lock in the rate before they soar higher, do you? If you don’t, we suggest to practice patience and look to accomplish a sale at a lower price point with more selection during 2021.

Eitel Insights has offered 2021 as a target to purchase since 2017, unlike all other analysts who have flipped flopped over themselves in the past few years, we remain staunch due to our ability to block out the noise and stick to the analytical interpretation. These ever changing fundamentals that most pontificators speak on are on data that transpired a quarter ago at least, this data is tainted with the CERB and other unusual stimulus. Those fundamental negative results will not be seen until 2021, then they will say the sky is falling after it already fell.

Real estate need not be, buy, and close your eyes. With Eitel Insights we open your eyes to the possibility of tackling the largest purchase of a life time with unemotional analytical interpretation, along with a history of accurately forecasting various markets across Canada.

To become an Eitel Insights client and be able to accrue actionable intelligence through our analytical interpretation, visit www.eitelinsights.com.

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Canadians Cite Difficulty Paying Mortgages, Even Without Pandemic’s Financial Impact

Most Canadians believe they’ll be able to pay their mortgage during the pandemic, it just won’t be easy for all. Mortgage Pros Canada (MPC), an industry group representing mortgage brokers, conducted a borrower survey on the impact of the pandemic. The survey yielded a number of interesting insights, but the most interest was the ability to pay. Most people are able to pay, but even some without a loss of income say they’ll struggle to pay their mortgage.

Canadians Without A Loss Of Income Say It’ll Be Difficult To Pay Their Mortgage

The vast majority of homeowners without a loss of income, are ready to pay their mortgage. Of these people, the survey found 67% will continue to make payments without a problem. Another 24% will make their payments, but with some difficulty. Overall, fewer than one in ten of people in this demographic will not be able to pay their mortgage regularly…CLICK for complete article

What Are We Seeing in Mortgage Rates?

Interest rates have plummeted in the last 5 months. What does that mean for your existing mortgage? Is it time to re-finance? Find out from Kyle Green.

Save Thousands in Interest by Refinancing Your Mortgage During COVID-19

What does COVID-19 have to do with interest rates?

Despite the substantial negative impact of COVID-19 across many industries, the virus has had a positive impact on mortgages, specifically for people getting a new mortgage today and for people that were in an existing variable rate mortgage. In general, when bad things are happening around the world, this tends to push interest rates down. Events such as 9/11, the credit crisis of 2008, Brexit and COVID-19 are all examples of situations in which interest rates subsequently fell 1% or more over a short period of time.

During trying times, money usually will flock to safety. Canada is a safe country to park money, and bonds are a safe asset class. Fixed mortgage rates are tied to bond yields, which means when bonds fall, fixed rates fall… CLICK HERE for the complete article

The Greater Vancouver Condo Market Should Prepare for Volatility

The Greater Vancouver Condo market is experiencing another stagnation period in price movement. Over the past three months prices have remained within a three thousand dollar bracket. Current prices are retesting the higher echelon of the middle threshold in the current market cycle. The average sales price is down 9% from the peak, signalling there is plenty of room to drop. Eitel Insights forecasts that during 2022 prices will have dropped nearly 30% from the peak experienced during 2018.

Prices have remained in another very tight range similar to the previous tight cluster of prices during 2019. The previous cluster sent prices higher pre pandemic. What is different this time is the Inventory is on the rise and growing much faster than the sales. Once the buyers eventually learn that they are in the driver’s seat, prices will begin to drop with gusto.

New listings grew at the highest pace since 2010 for the condo market, with over 2900 brand new active listings. Which is roughly 750 more new listings than the average over the previous 5 July data points. The sales did grow no denying that, but only by 159 sales from July 2019. Also over the previous 5 year average the July sales were actually down over 250. Seems like there is more of a need to sell than a demand to buy. The last two months of newly listed properties equals over 5700 new listings, the highest two month span in a decade.

With the abundance of new listings, the overall inventory grew by another 600 compared to June’s inventory. While sales did rise, not enough to mitigate the growing need to sell. Inventory numbers have risen to the 2nd highest peak in the past 5 years, with over 5600 active listings. Still to come is monstrous amounts inventory to be introduced to the market from the presales. Worth mentioning is the end to the evictions ban will likely be occurring in September. While the CERB is also seemingly coming to an end, and those whose are still without work who qualify for EI will be getting less money and some simply will not qualify. None of this bodes well for the demand sector of the Condo market.

The notion offered by some perennial bullish market watchers that due to the higher sales numbers in July, the Covid-19 effect has been nullified is erroneous. Yes sales have increased, but ever stop to wonder why? One answer is prices are down 9% and the price per square foot continues to drop signalling properties are selling for less money. Secondly those who had been pre-approved, pre Covid have followed through with those rate holds. There is usually a 90 -120 day prequalification rate hold. The idea that someone would purchase a home before they are about to lose their job is seemingly farfetched, but in this ever indebted society that is exactly what has been occurring. The 1404 sales which occurred in July, hold a distinct possibility that some of those new owners would not have qualified for that mortgage if they applied today. Those CERB payments helped greatly with the first mortgage payment but what happens to that owner once the free money era comes to an end. As stated the last two months had over 5700 newly listed properties, while the sales have achieved just over 2400. The trend is in the buyer’s favour.

Business’ that have been on hold are eager to get back to work, the challenge that most business are experiencing is, the market isn’t as eager to purchase as they are to sell. This will result in staff returning to work, only to be let go in short order. The economic impact of the first shut down is still in its infancy, imagine a second shutdown and the long term effects that would hold. Even if there is no second shut down the economic landscape will remain changed. With personal job, wealth, and health uncertainties not to mention those in your family who you may need your help. The idea of buying another expensive pair of shoes or a new watch, just because, are days gone by for most.

The market has been artificially propped up with free money, once that comes to an end, taxes will inevitably be raised to refill the governments desolate coffers, the full impact of Covid will be felt. With a glut of inventory and a lack of potential renters and purchasers, the roll out of this recession is well underway. Ultimately resulting in assets being sold, primarily secondary condo properties.

In summary, Eitel Insights cannot wait to offer a positive outlook for the Greater Vancouver Condo market, but the analytics of the current data projected into the future is not positive, we believe it is our obligation to offer actionable intelligence through analytical interpretation not pie in the sky optimism.

Dane Eitel, Eitel Insights

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Toronto Real Estate Joins The Flight To The Suburbs, As Inventory Rises In The City

Greater Toronto real estate is seeing a big jump in sales, and it’s mostly people fleeing to the burbs. Toronto Regional Real Estate Board (TRREB) data shows it was the most sales for July in at least a decade. The increase in sales was primarily driven by a surge in the 905, where inventory is falling behind demand. The City on the other hand, is seeing new listings grow at three times the pace of sales.

Greater Toronto’ Real Estate Prices Make Abrupt Jump

The price of a typical home, all types included, made an usually large increase during the pandemic. The TRREB benchmark price reached $880,400 in July, up 10.01% from the same month last year. The City of Toronto reached $967,900, up 9.06% over the same period. This isn’t just unusual during a pandemic, it’s an unusual trend for the history of Toronto real estate prices….CLICK for complete article