REBGV: November, 2021

Hello readers:

As most of you are aware, the current REBGV market is in hyper-drive with records showing a market that is even hotter than 2015.  For most of us, we did not anticipate that we would ever see a year like 2015 particularly when the foreign buyer rules and mortgage stress tests were tightened.  But with quantitative easing and interest rate at historic levels, we are in the midst of the greatest real estate rally in our generation.  With real estate price becoming a hot topic yet again in Vancouver, I would like to address what you should expect in the upcoming year and for few years thereafter instead of presenting my charts as usual this time around.  As you can guess, the charts look ... well... pretty astonishing or gross depending on which side of the debate you are in.

The 12-month outlook from this point on is now looking very clear.  There will be another 15% increase in 12 months in REBGV and 20% increase in FVREB in 12 months.  Spiking TH prices will lead the way and pressure an increase in real estate prices of entry-level detached homes.  Condo prices will remain relatively stable consolidating to a baseline figure next year which will remain stable for years to come. To be clear, there won't be any major down-correction in entry-level condo prices as entry level condos have moved relatively in line with today's economy. This was achieved by builders building smaller entry level condo units to keep the entry level prices down. If prices rise further, the developers will build even smaller studios and 1-bedrooms to keep the sales party going as the only way of adaptation to a world where RE prices and salaries no longer match.  If you are waiting on the sideline for an entry-level condo price to drop, you will lose value of your cash due to inflation while you are destined to end up with a smaller entry-level condo months or years down the road.

Only 1,000 new THs (and other attached properties such as row homes and duplexes) have been built this year in the REBGV territory where there has already been 7,700 TH sales this year alone. There are only 1,700 THs under construction at the moment with only 50% of them (850) expected to be completed in the next 14 months. The TH supply squeeze in REBGV is worse than what we are seeing with BTC supply squeeze (19 million BTC already mined out of 21 million available). What do you think will happen if you only build 850 THs in 14 months in the district of REBGV that has 1.5+ million people?  Do you not think that there is more than 1 in 1,700 people in Vancouver who wants a TH or other attached properties?  Will a 2% interest rate increase stop this train? Or will a 4% IR stop this train? I doubt either will be enough.  TH prices have gone up 26.6% in 12 months in Fraser Valley and yet the SAL ratio for THs is through the roof high at 127% this month in Fraser Valley.  This frenzy, by no means, is over.

The situation with detached housing is also getting worse by the day. There have only been 1,200 new detached homes built this year so far. But it is estimated that about 500 detached homes had to be torn down to build new attached homes (row homes, townhomes and condo) this year. That leads to a net plus of 700 more detached homes for the year in REBGV. This is a record low by a wide margin with situation getting worse every year.  Of course, majority of these 700 net pluses are not true net pluses as majority of them required an older home to be demolished for a new home to be built.  Also, most of the new homes are high-end $2+ million homes in REBGV and doesn't impact the availability of entry-level detached homes.  Given that entry-level detached homes are the ones being demolished to make way for high-end detached homes and attached properties, the supply of entry-level homes are shrinking already year-by-year.

Further expansion of high and medium density zoning change to densify the city will accelerate the loss of entry-level detached homes in the city leading to further supply crunch.  The only saving grace for detached housing at the moment is that there is way more supply of detached housing than THs currently.

All in all, it is unlikely that the market will crash anytime soon.  Real estate performs well during hyperinflation and we are seeing exactly that at the moment.  Developers are adapting by building smaller and the first-time buyers' desire for homeownership (with the help of the government's policy) will continue to support the housing prices at the entry level.

REBGV August, 2021

 

Sales for August hit over 3,000 yet again for 7 straight months this year which is the first time we've seen this since 2015.  In terms of total number of sales for the entire year of 2021, it is at a record setting pace.  It is unfathomable at this point that sales this year will in fact exceed that of the infamous 2016 during the era of foreign buyer frenzy.

Total inventory continues to collapse in Greater Vancouver as it is headed toward record low as we are approaching September.  Although there will likely be an increase in TI in September, it will land in the mid 9000s and uncertainly under 10,000 to keep it at pace for record low inventory for the month of September.  There seems to be little doubt at this point that inventory will head down to 6,000 by the end of the year making it one of the lowest total inventory we have seen during the last 4 months of the year.

New listings absolutely plummeted in July recording one of the lowest new listing for the month of July.  There is a mild recovery of new listing in August but it is still very much under 10-year average according to the chart above.  I suspect that new listings will bounce up as it typically does in September to the range of 5,000 to 5,500.  It should be the last chance for the buyers to see some new listings before the season winds down. 

At-asking and Above asking sales have remained steadily high at 40-45% in REBGV, 55-65% in FVREB (Fraser Valley Real Estate Board) and 55-65% in Chilliwack.  This suggests that there are many buyers who have previously been outbid that will be buying the spike of new listings coming in September.  Sales should continue to remain high and absorb the spike of new listings in September.

Months of inventory has hit the record low for the month of August.  Yes, we have never seen the Month of Inventory this low ever in REBGV.  Sales-to-active listing ratio has never been this high ever in REBGV.  The only question left to be answered is, "For how long will the MOI continue to remain at all-time high?"

Delistings are finally falling to the typical bull market range toward where you see lines for 2009, 2015, 2016 and 2017.  This is expected of course as total inventory has absolutely tanked under 10,000.  There are only so many properties that can be delisted in the face of 3000+ home sales monthly for 7 consecutive months while total inventory is under 10,000.  I expect de-listings to remain in this range between 1,400-1,900 for the next 3 months, which is a very typical finding during the bull market.

REBGV June, 2021

 

Total sales are starting to trend down to typical seller's market territory but it is clearly still on fire as it is clocking above 3,500 this month.  Generally speaking, any month with sales over 3,000 is a solid seller's market.  The next question seems to be whether the sales will plateau over 3,000 for the rest of the year.  There's no reason to believe that sales won't stay over 3,000 until the end of the year given the current influx of interprovincial and international immigration that is raising rent prices back up and further supporting Vancouver real estate market.

Total Inventory has sadly taken a dip month-over-month.  This is the first time we are seeing a month-over-month drop in June since 2015.  This is an unusual phenomenon and foretells more month-over-month decline in July and August.  In all other years when there was a month-over-month drop in June, there was another 1,200 to 1,700 inventory lost by the end of August for those years.  With the current Total Inventory count being under 11,000 at the end of June, we can anticipate that the Total Inventory will drop under 10,000 again before the end of August.  This will cause more bidding wars in September causing upward pressure on real estate prices.

New listings are falling too fast to support the current level of Total Inventory.  Known as the last ray of hope to fight against upward pressure on real estate price, new listings went from record high in March and April to being only 300 above the 10-year average.  With just 5,849 new listings this month, it was beat out by 3,762 sales and 2,218 delistings/expirations (combined total: 5,980).  It is early so far in July but early data suggests that July's new listing will be below 10-year average.

Here is another bad news for bears.  Delistings and expirations which are typically supposed to be low in a seller's market is defying odds and increasing again for 4 months in a row.  While, it is generally expected that delistings rise month-over-month from March to May, it is not common to see delistings increase in June as you can see from the chart.  To make matters worse, early data in July is suggesting that delistings will jump even higher in July to 2,400-2,800.  With July sales expected to reach over 3,000+ easily (611 sales already after 3 reporting days in July), new listings will need to be at least 6,000 to keep the current inventory level at where it is right now.  But even in the most bearish scenario, there is really no chance that Total Inventory will be more than 5,000 in July.  Expect some massive decline in Total Inventory in July.

Monthly inventory is inching up in the seller's market territory.  We are not seeing the same kind of sustained upward pressure that we saw in 2016 and 2017.  But this is more dangerous in a way because it gives the false sense of the market normalizing while upward pressure on price continues to be maintained as MOI is still well under 4.5.  Early data in July suggests that MOI will stay level in July putting the value of MOI near par with 2016 and 2017 again.

Buyer's market: MOI greater than 7

Balanced market: MOI between 4.5 to 7

Seller's market: MOI under 4.5

REBGV April 2021

Sales increased to all time highs in both March and April this year during a buying frenzy like we've never seen before.  It was believed that the highs of 2016 could never be beat... until we've seen the unthinkable this year.  

We are starting to see Total Inventory (TI) rise during the spring as expected every year.  Not surprisingly, we are now in the positive territory for year-over-year TI change.  This is of course as a result of the pandemic causing suppression of TI in April of 2020.  It is certainly nice to see some inventory come out on the market as it appeared quite bleak for the past 6 months.

We are seeing record highs in New Listings what we've never seen before.  It is more than making up for the spring market we missed out on in 2020.  I expect the record monthly new listings to come down to the mid-7000s in May.  We should see higher than expected new listings for the rest of the year as the pandemic lockdowns come to an end.

Months of Inventory is second only to 2016 all year so far but we may see this year get beat by 2017 as sales start to cool in May.  But it is still well within the seller's market (seller's market is under 4.5).

We are seeing delistings rise month-over-month a bit more than expected in April.  We should continue to see monthly delistings rise in May which has a suppressive effect on the Total Inventory.

REBGV February, 2021

 REBGV February, 2021

Sales are exploding in the entire Lower Mainlands despite the ongoing pandemic concerns in what is turning out to be a real doozy of a year.  We are seeing sales beyond 3,500 which blows past the crazy year of 2015 and is only second to year 2016.  Sales are expected to rise again in March possibly up to 5,000.  There are no immediate policy change coming to stop the runaway train at this time as the government continues to release funds to keep the economy afloat.  Expect massive increase in benchmark price in REBGV of ~15% and FVREB of ~20% over the next 6-12 months.

Total inventory has fallen month-over-month for the first time ever during the month of February.  This is a very significant development and speaks to the real stress on the buyers as they face very limited number of supply while losing out on bidding wars time and time again.  Although we should still some increase in inventory in March, it is expected to be a very mild increase and well below what is needed for the market condition to return to balance.  

New listings rose in February month-over-month which was an expected development in a seller's market.  Sellers realize that bidding wars have returned and that they are excited to take advantage of this development after missing out on the entire spring market in 2020 due to the Covid-19 pandemic.  My prediction for New Listings is high.  I expect the New Listings to reach over 6,500 and possibly over 7,000.  However, I also expect the combination of sales/delistings/expirations to be over 6,000 making the Total Inventory rise only very modest.

We've not seen such a low Months of Inventory (MOI) since the foreign buyer tax was increased further in 2017.  The low MOI is only second to 2016 and the trend is expected to fall below 2.0 easily for March.  SAL ratio is expected to rise into strong seller's market with SAL ratio that is easily above 50% in March.  My prediction for SAL ratio for March is 55%.

MOI under 4.5 => seller's market

MOI 4.5 to 7 => balanced market

MOI over 7 => buyer's market

REBGV December, 2020

 

Greater Vancouver home sales have shockingly gone up month-over-month in December.  As clearly seen in the chart above, this is a record high in recent times and breaks all time high by a massive margin.  This is an alarming sign that early 2021 is going to be a real doozy.  Are we going to see likes of early 2015 or early 2016?  My guess is somewhere in between those 2 years.  Time to sit back and watch...

Total Inventory dropped by 2,580 month-over-month which is the biggest month-over-month drop in December since 2011.  It is well below expectations and there are no signs of panic selling as many predicted several months ago.  In fact, Total Inventory will continue to look quite low if sales continue to remain at such strong levels.

New Listings remain high but it is starting to return to more typical levels.  For the start of 2021, New Listings will continue to come closer to the typical 10-year average.  Given that the interest rate is anticipated to be low for few years, home prices are expected to rise steeply in 2021.  This means there will be many homeowners in the holding position to start the year.

Year 2020 wraps up after all as a bull market as Months of Inventory finishes under 5.0 in 9 out of 12 months of the year.  Months of Inventory continues its decline with only 2015 in its way of it being a historic low.  Sales are sizzling hot and it will continue to explode leading to suppressed Months of Inventory in early 2021.  

De-listings are falling off the chart as sales are exploding in December.  This is a typical finding of a market that is quickly turning into a seller's market.  This is an alarming sign that many more home listings are selling rather than expiring.  In 2021, I expect de-listings to remain low while sales skyrocket in early 2021.