January stats released by the Real Estate Board of Greater Vancouver sparked a flurry of confusion, and various market pundits incorrectly analyzing the data. This is ultimately one the main reasons why I started this blog several years ago. There’s a lot of noise out there, and my job is to cut through that.
About eighteen months ago I was having to convince people that prices were indeed starting to fall. Fast forward to today and I’m now having to convince people that prices are rising once again. However, it’s important to understand that each area, and price segment is performing differently. Obviously we could analyze things to death, but i’ll spare you and me the headache. Let’s take a brief overview of the month that was.
The condo market in Greater Vancouver as a whole, continued to show signs of a recovery in January, with sales increasing and new listings declining. This kept inventory levels in check.
Condo sales jumped 46% year-over-year and were just slightly above their ten year average for the month of January. Overall, demand looks fairly healthy, albeit sales are still well below the boom years.
Again the big story here is the persistent weakness in new listings. We can’t explain why new listings are so weak, my theory is it has to do with low/ real negative interest rates. There’s no liquidity crunch forcing people to sell. And in a financial environment that punishes savers, maybe homeowners have decided it’s best to hoard as much real estate as possible.
This has kept inventory levels from rising, with 4.2 months of inventory for sale, indicative of a balanced market. Although, anyone actively searching in the market would probably tell you otherwise. At least for one bedroom condos, which only has 2.8 months of supply.
So, as a result we are starting to see prices rise again. This is being reflected in the average price per sqft, which started rising back in July when sales picked up. The average price per sqft for condos is now up 2.1% from last year.
I think where people are getting confused is by looking at the MLS benchmark index which still shows prices were officially down 1% from last January. Remember, the benchmark, as I have mentioned in the past, is a lagging indicator. Further, if you understand how rate of change works, you can see there is a clear acceleration higher after bottoming at -9% in June of last year. At this pace, the benchmark should show higher year-over-year prices by March.