Greater Vancouver detached sales jumped an impressive 72% from last year. That’s head turning stuff, but sellers shouldn’t get too excited. Detached sales were still stuck below their long term ten year average. In other words, despite a fairly significant decline in prices and mortgage rates, activity in the detached housing market is still languishing. Again, this is ultimately an affordability problem which becomes difficult to overcome with a stress test capping borrowing capacity and wages not growing quick enough.
Perhaps one of the better ways to illustrate this is via a 12 month moving average of detached sales.
Sure, this is a lagging indicator, but what it ultimately suggests is that we have a long ways to go before declaring a full recovery, or for that matter, a new bull market.
What we are seeing is that sales have picked up recently, and new listings have failed to keep pace, still dropping on a 12 month average.
Why people aren’t selling is somewhat of a mystery. It could very well be a function of low interest rates, allowing people to stay in their homes for longer, or perhaps secular behavioural changes, particularly amongst an aging demographic who prefers to stay put. In fact, a recent article from the Wall Street Journal highlights research which suggests US homeowners are moving less, on average once every 13 years, instead of once every eight years previously. And so, that brings us to inventory which has basically flatlined at 5.9 months of supply for the past couple of months (indicative of a balanced market).
Lastly, and more importantly, what does this all mean for prices? We are seeing a moderation in the decline of house prices as per the MLS home price index. Of course, as a rule of thumb, we are still seeing downwards price pressure on luxury homes, basically anything above $2M, while the more affordable entry level houses appear to have levelled off.
Clearly there are positive signs towards a recovery in the detached housing market, although whether recent activity can be sustained remains an important question heading into 2020.