Detached sales prices of $1.494 million are at the low end of the downtrend established in 2017, simultaneously testing the one of the low ranges of Vancouver’s current detached market cycle. We had anticipated a tight selling range for the remaining portion of the year. However if the prices dip to $1.480 million before the year end we will have a greater probability of the market recession reaching $1.225 million (red line).
Detached sales which have been touted as a sign of strength has been greatly misinterpreted by the majority of Real Estate Analysts. There were 852 sales in July 2019, well below the average since 2005 of 1070. Not to mention that there could have been 1100 sales and the market would still be in a downtrend with respect to detached sales.
There were 6370 detached properties for sale in July, continuing in the upward trend of available listings throughout Greater Vancouver. Again we are well above the growth cycle of active listings. Greater Vancouver could have seen only 5275 listings in the month of July and still been in the upward trend. The average since 2005 has been 5858 available listings in any given month.
The rationale for why the market is seeing a temporary lift is due to the Stress Test Mitigation. What we mean by that is the sale prices have fallen off 18% from the peak. Meaning those that have been forced to the sidelines due to the 20% increase of mortgage qualification, can now begin to purchase. This, as we say, will be a temporary effect. Once the demand due to stress test mitigation is introduced to the market the sales will pick up and we anticipate a tighter range of average sales price. However once that buildup of demand dissipates, we will see the market continue lower.
The Detached market is still plummeting especially when you take a 1 or 2 year outlook. Eitel Insights sees a tumultuous time still upcoming for sellers, and we anticipate the market to continue lower with a test of $1.400 million in our future. If that price point does not hold we expect the market to sink lower until we see prices of $1.225 million across Greater Vancouver on an average sale price. With inventory above historical norms and sales below, we do not see the market changing immediately. Of course with a 20 year outlook you can purchase anytime, however we offer actionable intelligence that allows our clients to purchase with real insights of short and long term market trends.
Condo Market Update
Unlike the Detached market, the condo market is at the downward trend highs. As you can see in the chart the Condo market is in the middle of the projected market cycle. With the average sale price of Greater Vancouver coming in at $656,000 the market is down 13% from the peak. We anticipate this price point decreasing over the upcoming years leading to a test of $525,000 a total drop of 30% from the peak. Before that occurs we will see tests of $635,000 and again a test at $584,000. Once both of those support lines fail to prop up the market we will see that test of $525,000.
Condo sales in July saw 1245 higher than the July of 2018, and analysts are acting like the flood gates are about to open, we see it differently. In truth the sales could have been at 1600 sales in July and we would still firmly be in a downtrend. Yes we have found our way out of the falling knife down trend, however we still are in the midst of the overall conservative downtrend depicted in the chart below.
The inventory of the condo market saw 5588 available listings across Greater Vancouver. Staying near the 4 year high in active listings. We anticipate this level to continue to grow and be the major cause of prices falling over the upcoming years. With all those presale properties eventually coming to completion. The market will be inundated with active listings, even now the realtors are continually getting emails about assignments sales because developers do not allow their buyers to publicly advertise the listing on the open market. Once the property is completed the market will sharply rise in active listings and with each new month see higher and higher inventory. Eventually leading to the cannibalization of the condo market with new properties selling with warranties and kickbacks the resale market will be forced to lower their prices to see any offers. Thus forcing newer properties to lower their prices and the vicious cycle will repeat until the market bottom likely in 2022.
Dane Eitel is the founder and lead analyst of Eitel Insights. Click here for more information.