The Vancouver Real Estate market made headlines this past week with a whopping 64% increase in sales on a month-over-month basis. While headline readers may be stricken with a sudden panic of missing the dip (if you can call it that), further analysis suggests there really is nothing to fear.
Due to the rather inconvenient timing of a once in a lifetime global pandemic, the spring housing market was essentially shut-down this year. In what is normally the two busiest months of the year, April & May were complete duds, recording multi-decade lows in sales. As the economy re-opened, the pent-up demand from the spring market resulted in nice uptick in June. It looks like the spring market was essentially bumped to this summer.
However, after further review, it turns out the pent-up demand was rather not that impressive after all. June sales were still 21% below their ten year average. Suggesting home buyer demand remains weak.
The real story here is all about inventory. The total number of homes for sale in June slipped 27% year-over-year, as sellers opted to stay put in their homes during these uncertain times. Considering the government essentially mandated stay at home orders, issuing CERB cheques, halt on tenant evictions, and mortgage deferrals for nearly anyone who asked, it makes sense that new listings essentially collapsed.
This has now resulted in a supply crunch. In fact, detached housing inventory for Greater Vancouver shrank 34% year-over-year, falling to their lowest levels for the month in over a decade. In other words, those multiple offers you’re hearing about for single family homes is almost predominately due to a sudden lack of supply, not from a frenzy of buyers eagerly binging on record low mortgage rates, although that certainly does help.
The question now becomes, will the great re-opening result in a normalization of new listings and an increase in supply? Or will homeowners continue to hunker down at home? My hunch is on the latter.
Three Things I’m Watching:
1. Pent-up demand? June sales in Greater Vancouver were still 21% below the 10 year average.