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. 

Greater Vancouver Detached Sales (12 month rolling average)
Detached sales in Greater Vancouver, 12 month rolling average.

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. 

Greater Vancouver Detached Listings (12 month average)
Greater Vancouver Detached New Listings (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.  

Greater Vancouver Detached Prices Y_Y
Annual Change in the MLS home price index for detached homes.

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. 

This is an excerpt from The Saretsky Report. You can subscribe HERE. 

 

3 COMMENTS


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    Blair Penner

    Hi Steve,

    “Why people aren’t selling is somewhat of a mystery”. This is not a mystery. House owners remember how much their neighbors sold their houses for, at the peak of the market. They simply don’t want to sell lower than their neighbors. They won’t list until the market recovers.

    Blair


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    Burt

    When I look at the 12 month rolling average chart of detached sales dating back to 2005, I see years of lower lows, sales decreasing. Does this not largely make sense in the context of the market mix changing?

    Detached was once the norm and majority of housing stock, condos/townhouse are taking that crown. I would expect Detached sales to print lower and lower sales numbers as the years grind on. Basically a continuation of trend.


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    Burt

    Submitted the reply too quickly, pardon the double post.

    As to why no listings, Ill offer an anecdote based on my parents and their circle of friends.

    Average Vancouver Boomers, detached houses in nicer areas of town that once were blue collar. All sitting on say couple million tax free on average, plus minus of course, all in their 70’s considering the next move.

    Kids and grand kids are mostly in Vancouver, so they are somewhat tied to the City, social network all in Vancouver.

    They all want to downsize, but unwilling to micro size into 800sq/ft 2 bedrooms. They all browse listings for condos and town homes and see that “appropriately” sized condos are $1.5 million+ with substantial Strata fees to consider, ditto for town homes.

    In a strange way, even though they have millions in equity their housing options are somewhat limited too. Why would one essentially make a lateral financial move from detached into condo? The attraction would be for a downsize, while also pocketing say a million or so.

    Until a time where folks like these are forced into a sale, detached runs up much higher than condo, like early in bull market, or condos get much cheaper, I imagine the detached market volumes will remain depressed due to folks simply not selling.

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