Real Estate Hits 20 Year Low

Posted by Dane Eitel

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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.