The first data of 2020 is in; the averages sales price for Greater Vancouver is down $80,000 from the previous month, and down $40,000 year over year. No sense for optimism from where we sit.
The price point is in the middle of the current market threshold. After a successful defense during 2019 of 1.5 million, Eitel Insights anticipates the next test of 1.5 million will break through and prices will indeed test he 1.4 million threshold. Previously established in 2015. At that point all equity gained over the previous 5 years will be erased.
Sales are significantly lower than a quarter ago. Of course, there is a seasonal factor at play and the 444 sales were higher than the previous January when only 344 detached homes sold.
We feel a need to point out what occurred during 2018 and 2019 for the sales activity. In 2018 the stress test was introduced which diminished purchasing ability by 20%. That forced a major segment of buyers to the sidelines. In 2019 prices had indeed dropped to 1.5 million which is 18% from the peak in prices. Basically nullifying the stress test for the first time. It took the market dropping 18% for purchasing to begin. The 2 year backlog of buyers meant pent up demand that was finally able to release in 2019.
The current prospective purchasers are in a wait and see mode. We anticipate the sales numbers to again jump once the market reaches stress test mitigation. The Market sentiment will also begin to turn further negative as the introduction of the need based seller becomes prevalent in 2020.
The Inventory numbers have hit their lows and will begin to rebound during the upcoming spring and summer markets. Eitel Insights forecasts the detached inventory will again return above the 6000+ active listings by the beginning of the 2020 school year. Current inventory levels in January were 3947 the lowest amount since February 2016.
The notion that the demand has eroded the inventory is a fallacy. The inventory had dried up due to seller’s fatigue. Much of the inventory had a listing that was at expiration and rather than relist they took the 4th quarter off. After that time off, still with a need to sell, propelled on by the hyped sales numbers reported by the board the inventory will be loaded soon enough.
We advise to the sellers who will be in that need based situation begin to sell now before onslaught of similar stories hit the market. Need based selling will become necessary in 2020, propelling the market lower in price. Simultaneously the buyer’s trepidation will skyrocket. The only way to mitigate their pessimism will be time. Which is not something every seller will be able to afford in the upcoming market.
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