With regard to the two things that dominate water cooler conversations across the region (the weather & real estate), Greater Vancouver experienced a rather ironic summer: the smoking-hot temperatures (the weather was, quite literally, both smoky and hot) were accompanied by a cooling housing market. While sales activity does tend to cool during the summer months, the continuation of depressed sales and inventory expansion are at the root of the price moderation that is currently underway.
Benchmark detached prices have now fallen for three consecutive months, while those of townhomes and condos have seen two consecutive months of decline. It is worth noting that in sum, these declines have amounted to benchmark prices falling by 3% for detached over the three months, and 1% for townhomes and 2% for condos over the past two. Not a crash by any stretch of the imagination, but certainly a change in trajectory from our recent experiences.
And this is where it’s important to consider these trends with a level head. Otherwise, it’s easy to fall into the trap of becoming too dramatic, as the Huffington Post did recently with their headline "Vancouver Real Estate Is Starting To Look Like A Disaster".
Whoa, Nelly. This sort of hyperbole certainly doesn’t shed much light on current market conditions, or where the market might be headed; it only serves to fan the flames of uncertainty. A critical assessment of current conditions does hint that prices may have further to fall—but, more than anything, this reflects a normalizing of the market (at least in terms of sales and listings).
It is human nature to let our most recent experiences dominate our thoughts. Real estate headlines reflect this tendency: recency bias results in a view that sales are plummeting and inventory booming, both to levels that will result in prices tanking.
The data show that it is the past three years that have been off-trend, with an unprecedented rise in the number of sales, a decline in available inventory (particularly for multi-family product), and increases in benchmark prices. Relative to the years that spanned 2005-14, the 2015-17 period saw average monthly sales that were 21% higher, average monthly inventory that was 27% lower, and month-to-month benchmark price increases that averaged 1.4% versus only 0.4% in the earlier period.
In August 2018, despite sharp increases in year-over-year inventory (of 24% overall) and decreases in sales (36%), total inventory was still 19% below this long-run historical average (though sales were also 24% below the past-decade average).
Looking ahead, we expect the rest of the year to be characterized by a continuation of the current conditions—especially given the headwinds created by the housing policy, regulatory, and interest rate environments. In other words, the market should continue to normalize over the coming months. Beyond that we are looking to broader economic and demographic fundamentals as the drivers to market change.
Each month, rennie Intelligence produces the rennie Review, which includes the latest real estate data for Vancouver and the Lower Mainland's housing market. Check out the latest edition of the rennie Review here.