and the Horizon Looks Ominous. Money Save is Money Earned.
May 2020 will be remembered as the month CMHC finally turned negative. They stated the two major markets in Canadian Real Estate will be going lower for the remaining portion of 2020 and into 2021. Something Eitel Insights has been stating correctly since 2017. The CMHC forecast sounds very familiar if you think about it.
Eitel insights stated in 2017 prices had peaked and would decline until 2021 dropping from 1.830Million to 1.4Million. In 2018 we stated, if 1.4Million does not hold as a bottom then as low as 1.225Million would be tested.
The CMHC forecast as of May 2020 calls for a 9% – 18% drop. Interesting, since the average sales price in Vancouver was 1.6Million that would put their forecast at 1.45Million for 9% drop or 1.3Million at an 18% drop. Just a bit of a rosier colour than our forecast offered years ago.
The exactness of Eitel Insights forecasts been unmatched, while others have continued to flip flop their positions, we have remained true.
Greater Vancouver detached prices in May dropped to 1.585Million which is the middle threshold of the market cycle. Seemingly breaking the uptrend that has been prevalent since September 2019 and instigated with an average sales price of 1.5Million.
CMHC tightening the purchasing restrictions for mortgages with less than 20% down will only perpetuate the tough market conditions. With the old normal, prices were in decline, and our new normal is not very promising. Prices will continue to search for lower prices as the market goes forward. We do anticipate a test of 1.4Million in 2020 with 2021 confirming the market bottom.
Gone are the days of 10 year outlooks, Eitel insights has advised potential purchasers to steer clear from buying at the market peaks. To date over $245,000 (from 1.830Mil – 1.585Mil) saved if the temptation to purchase has been resisted through our analytical interpretation. The 10 year outlook, if purchased in 2016 after 5 years will be down by $430,000, once 2021 realizes the 1.4Million forecast. Meaning your investment is negative, which forces you to put more time and money into an asset that is underwater.
Once the bottom is confirmed by our analytical process, prices will begin to increase back up to the old market high and beyond. This is how Eitel Insights clients invest, we analyze and observe, and then step to the plate buy at the low echelon of the market cycle. We cannot wait to offer the opportunity to make money in the Real Estate market rather than saving you money like we have been, but remember, money saved is money earned.
Sales are the headline, with only 544 detached sales taking place at land titles in May 2020. The accepted offers in May were only at 525. Which has been quoted as a great number compared to 370 in April and true enough but beating a lame duck doesn’t make you a champ.
Let’s take a look at the past 5 years of May accepted offers. 2015 had 1837, 2016 had 1820, 2017 had 1503, 2018 had 839, 2019 had 839, and of course we just had 525 accepted offers last month. This epitomizes what we have been try to explain would transpire. After peaks comes valley’s. The peak was frenzied, the bottom will look deserted. We advise purchasing during the desertion, while there is copious amounts of inventory and prices at the lower end of the market cycle.
The historically low sales numbers experienced recently, are occurring during the usual peaks, you can imagine what the sales number will look like during the seasonal market lulls.
Inventory has hit an artificial ceiling of 4200 active listings across Greater Vancouver. This number has been tested twice thus far. Once the 4200 level is broken we anticipate the next levels to be broken with relative ease. The upcoming levels are 4500 and then of course 5000, at the 5800 level the market will meet up with the 15 year average.
One interesting point on the chart is the high levels of inventory during the market peak of 2017 was the seller’s choice to trade their property for an all-time high sale price. This upcoming high level of inventory will largely be out of need to sell. These upcoming sellers will have a very different modus operandi.
Once inventory return to normal levels which will inevitably occur, we anticipate the downturn in prices to return with gusto bringing the average price down an additonal $185,000 lower than the current price.
Again, Eitel Insights has saved a potential purchaser $245,000 to date with more savings on the horizon. Stick with the industry leader, since inception Eitel Insights have led all contemporaries.
Not all markets in Greater Vancouver are created equal, some areas are closer to the bottom. While others still have significant percentage losses upcoming. Become an Eitel Insights client to find out which are which.
Dane Eitel, Eitel Insights
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