REBGV: April, 2020 Projections

Due to the Covid-19 pandemic, sales will collapse to the lowest seen in decades and is roughly estimated to end somewhere in the 1200-1400 range.  This will bring the SAL ratio to the balanced territory.  As stated in my last edition, low transaction (low sales and low new listing) months don't lead to significant changes in prices particularly with SAL ratio in the Balanced territory.  We see this every December which has no impact on the spring market.  We will need to wait until social distancing rules are reduced to see which direction the market is headed.  Given that BC is effectively flattening the Covid-19 curve thus far, we could see businesses re-open gradually starting in May as John Horgan, Adrian Dix and Dr. Bonnie Henry suggested today.  Low sales are expected to extend into May due to Covid-19 before we start to see a slight month-to-month gain through the summer.

  

Total inventory will fail to increase month-to-month for the first time since 2009.  This is due to unprecedented low new listings we are seeing this month due to Covid-19.  We should see TI continue to struggle for May.  As long as TI remains under 12,000, the hope of a massive decline in benchmark pricing in 2020 is out the door.  Bears will want to see at least a 1,500 TI increase month-to-month to get to 12,000 or higher as fast as possible before the winter arrives.

   

We are seeing something here that we will likely never see again.  New listings falling off the cliff like we have never imagined.  The chart says it all right here and there is nothing more to be said.

REBGV: March 2020

I would like to start off by wishing everyone well during these tough times.  Stay safe and stay home! I would also like to thank our health care workers during this tough time who risk their lives everyday to keep us all safe!



As you are all well aware, we are now entering into a period in real estate market that won't be mirrored by any stats in recent times.  The initial March sales data was strong with total sales heading toward 3,000+ for the month of March with a SAL ratio of whopping 30%.  But the sales have been halted in the latter half of the month as social distancing measures closed down open houses and hindered real estate transactions.  With the government reporting that the current social distancing measures will carry on for the entire month of April, we should see a jaw-dropping drop in sales to about 1,000-1,300 in April.



Growth in total inventory was also halted by the Covid-19 pandemic with TI actually trending negative during the latter half of March.  This trend should continue into April and we could be seeing TI under 9,000 by the end of April.  We are very likely to see a month-to-month Total Inventory decline in April for the first time in 11 years with TI falling dangerously low.  With realtors reporting that up to 50-70% of current inventory not being viewable at this time due to the fear of Covid-19 spread, it is quite possible that the current true available TI count may be much lower under 5,000 which is unimaginably low for a population of 1.7 million+ in the REBGV territory.



New Listings were heading for high 4,000s in the first half of April but they have significantly dropped off as sellers are unable to hold open houses.  I also suspect that there are many sellers who don't want visitors entering their homes during the Covid-19 pandemic.  This has led to a significant drop off in New Listings which is exacerbating what has already been a low New Listings streak that has lasted for over a year.  We are going to see all kinds of records being broken in the upcoming April in terms of Sales and New Listings but I suspect that nothing will be as impressive as the drop in New Listings in the upcoming month.  It will likely be off-the-chart at around 2,500-3,500.



With so much going on right now with both sales and new listings plummeting, it may make more sense to look at the MOI rather than the individual sales and new listings data.  MOI has finally crossed that line under 4.  However, this will be very short-lived as sales will plummet in April due to Covid-19.  We will see a significant bounce up in MOI in April well within the balanced territory.

Having said the above, I don't believe that MOI can be interpreted to say that either the seller or the buyer has an advantage at this time.  Low transaction periods are tricky and the current pandemic situation is even more complex.  We see low transaction in December every year and the MOI in December is hardly useful in telling us what kind of market we are likely headed for in the spring time.

What we do know is that the market was certainly headed toward the seller's market prior to the pandemic.  As to whether this will resume when the world begins to turn again is anybody's guess at this point.  A bear can point to permanent job losses, business closures and bankruptcies but a bull can point to cheap mortgage and delay in housing constructions which is already trailing behind GVA population increase.

MOI 1-4 months: Seller's Market

MOI 4-5 months: Seller's Market (but price increase expected to be similar to annual inflation)

MOI 5-7.5 months: Balanced Market

MOI > 7.5 months: Buyer's Market

De-listing data is staying below 10-year average and will remain low in upcoming April due to the sheer lack of inventory in the market right now.  The DEAL Ratio (Delisting/Expiration to Active Listing Ratio) is typically around 11-15% in April so we should see expirations around 1,100-1,500 this month.

REBGV: February, 2020

February sales finished roughly 15-16% under the 10-year-average and finished under the 2018 levels.  I anticipate that this is the beginning of a possible storm ahead.  Mortgage stress tests have been loosened and the Bank of Canada has cut down on the interest rate by 0.5% just 2 days ago.  This is the first rate cut since 2015 when it caused a significant housing boom.  Interest rate cut has consistently led to big housing booms in the last 20 years and this will certainly cause another housing boom in Vancouver.  Sales watch has never become more interesting now over the next several months.

Total Inventory struggled to rise during the first half of February but it started to pick up during the latter half rising over the 9,000 mark to finish the month.  It is widely anticipated that the TI will cross over 10,000 in March, 2020 which is a welcoming sign for buyers looking for options.  But with over-ask and at-ask sales increasing in frequency, deals are becoming harder to find across REBGV.

New Listings finished low again for 4 years in a row for the month of February.  You will see from the chart above that the 4 lowest data points are in fact 2017, 2018, 2019 and 2020.  When will we start to see some New Listings?  The good sign right now is that the New Listings picked up during the last week of February and the first week of March so far has been very strong.  So it finally appears that we will see some New Listings in March.  Stay tuned...

MOI has dropped to 4.5 as expected for the month of February.  MOI is anticipated to drop in March which means that the market will fall further in seller's market.  It appears increasingly more likely that 2020 will be a seller's market as government policies (loosening of the mortgage stress test followed by the interest rate decrease) take into effect.  The next question now appears to be just how much of a price increase will we see in this year's market?

MOI 0-4 months: Seller's Market

MOI 4-5 months: Seller's Market (but price increase expected to be similar to annual inflation)

MOI 5-7.5 months: Balanced Market

MOI > 7.5 months: Buyer's Market

February 2020 Projections

Sales appear to be on track to finish under 10-year average in February but it will finish way over last year's low.  You can argue this one either way.  It is good to be under 10-year-average but it is not good that it has increased so much year-over-year.  But there is no doubt that a big player in this month's sales have been the historically low New Listings this month which I will discuss further below.

Inventory is struggling to rise in February.  It has yet to surpass January 31st sales as of today.  Although it should rise eventually towards the end of February, the damage has already been done for this month.  This was an opportunity lost to see a major rise in TI this year.  This increases the probability of "TI flatline" that we saw in year 2013 from February to June.  If TI flatlines, it will be devastating for buyers as the starting point for TI is lower this year than in 2013.

This is the news of the year so far just like in 2019.  We are starting 2020 at levels under any other year in recent times.  Let's not forget that year 2019 was the lowest new listings year we've had in the longest time.  When will the sellers return to the market?  We've been waiting for this all of last year and now the first 2 months of this year.  If it must happen, it should happen March to May when New Listings hit the peak season.  Time to grab the popcorn.

De-listings are slowly starting to decline against the 10-year average which is typical for a seller's market.  As you can see on the chart above, 2009, 2015, 2016 and 2017 had very low de-listings.  We can expect the de-listings to remain low for the next couple months.  This is because we have so few Total Inventory to begin with while the SAL ratio remains high.  This is the right cocktail for low-delistings.

It's hard to see this year's MOI trend if you can find it.  The reason why it's hard to look at is because this year's trend so far is nearly identical to 2 other years: 2011 and 2015.  This 3 lines nearly overlap each other.  One can recall that 2011 was a balanced year and 2015 was a seller's market.  With MOI nearly guaranteed to drop month-over-month in March, we should be well within the seller's market in March.

MOI 0-4 months: Seller's Market

MOI 4-5 months: Seller's Market (but price increase expected to be similar to annual inflation)

MOI 5-7.5 months: Balanced Market

MOI > 7.5 months: Buyer's Market

Sales in December finished strong and reared its head above the 10-year average for 3 months in a row.  There were some fluctuations along the way month-to-month in 2019 but the general trend is now obvious.  The buyers are more satisfied with the pricing of today's market.  There is no sign that the sales are about to struggle in Jan-Feb, 2020 like it did in Jan-Feb, 2019.  Weak Jan-Feb sales are consistently followed by a weak Nov-Dec sales from the previous year.  As such, you can anticipate that the sales will remain at 10-year-average or above during the next 2 months.

The big question to be answered in January is whether Canada's interest rate will drop a quarter percentage.  Should this occur, it will have a significant impact on sales.

Months of Inventory will decline in December month-over-month as it inches closer to sellers' market.  The lower MOI is mostly driven by popular condo sales in REBGV which is now showcasing a SAL ratio of 32%.  We have seen lower MOIs in December in 4 other years: 2009, 2015, 2016 and 2017.  All 4 of those years were entrenched in a very strong sellers' market.  If the MOI drops below 4 in January or February, any hope of further decline in prices in the new year will be completely dashed.

MOI under 4 = Seller's Market

MOI 4-7 months = Balanced Market

MOI over 7 = Buyer's Market

Total Inventory took an unexpected fall in 2019 and took rather a large drop again in December.  The low new listings played a significant role in this year's inventory drop.  We can anticipate the TI at the end of January, 2020 to be around 9,000-10,000. 

REBGV 2019 Review

Yearly New Listings hit some significant low this year and is by far the story of 2019 in REBGV.  This had a direct impact on negative total inventory change year-over-year.  This is now 3 consecutive years of New Listings decrease on a yearly basis.  As you can see, this is not a common occurrence.  It should rebound next year but it's not clear to what extent.

Annual sales beat out last year's low and finished ahead of 2008, 2012 and 2018 during the recent times.  It is widely expected that sales will increase next year given the recent rise in sales and SAL ratio during the latter half of 2019.

Year-end total inventory dropped year-over-year which is a surprise given how 2019 started in the beginning.  It took a turn during the summer and continued to drop during the latter half of the year.  With both sales and new listings expected to be higher in 2020 compared to 2019, it will be interesting to see which direction TI will go.

REBGV November, 2019: Sales

Sales remained strong through November keeping the monthly sales above the 10-year average for 2 months in a row.  Is this just a result of falling prices?  Not too long ago, we had some incredibly low sales during March and April of 2019.  The price difference between now and then among different housing types are 0-2%.  Thus, it doesn't appear that falling prices are exactly responsible for this.  If so, then what are we to expect if the interest rate is to drop as expected in early 2020?  Only time will tell...

The total inventory continues to plummet under the burden of yet another low new listings month in the setting of recovering sales.  REBGV has lost almost 2,000 inventory year-over-year despite the record breaking new project completions.  The Total Inventory is now headed toward 8,500 by the end of December.  Total Inventory tells only half the story but if there is a price increase next year, one could have looked at this worrisome sign as a major red flag.  At any given time, sub-9,000 Total Inventory is a strong indicator of a seller's market to come.

It is now 10 months in a row of low new listings.  I previously predicted the new listings to start picking up against 10-year average by this month but I am amazed at the seller resilience at this point.  We are headed for decades low in annual New Listings total which will come out early next month.  The kind of impact this has had on the total inventory is regrettable.  

This is truly a disappointing graph.  I expected the MOI to recover in November and December but strong sales continued on despite the cold weather and has kept the MOI near buyer's market level.  Four days into December, it appears that the sales will remain strong again keeping the MOI between 4-5 months for the month of December.

There you have it.  De-listings falling under 10-year average after staying above 10-year average for a year.  This is as a result of higher than expected sales.  Sales exceeded de-listings 2 months in a row which is generally an indicator of price increases to come. I am about to barf...

REBGV: November, 2019 Total Inventory Projections

This is hardly what many have expected during a sizzling 12-month period of record high housing completions in Greater Vancouver.  But it became evident when New Listings continued to struggle all year that this could very much happen.  We are now seeing about 2,000 inventory drop year-over-year.  What the market has shown this year is the ability to absorb the record high housing constructions and completions.  With Total Inventory expected to tank under 10,000 for the first time since April, 2018, there is trepidation building among the potential buyers as to whether they may have missed the bottom.  I personally do not believe this and I do not expect a price recovery soon.  But the low Total Inventory adds a level of intrigue in a market that is in a transition period.

REBGV November, 2019: Sales Projections

Sales projections show that total sales in October appear to be a blip in the radar.  The general trend over the last 5 months does not show sales recovery but stability.  The sales over the last 5 months remain well within the typical 10-year norm and I do not expect any major change to this trend in December or January.  February sales will be key in determining what kind of spring we should expect to see.

Annual Total Sales Projection: 2019 Sales expected to exceed 2018 Sales.

REBGV October 2019 Projections

Sales are rising to possibly one of the best months of 2019.  It is very rare for October sales to be the year's best sales month (see chart above) and it certainly hasn't happened in recent times.  It is a remarkable turn of events since April and speaks to the drop in prices and seller expectations over the last several months. While sales are being completed under asking in most cases, continued uptick in sales will eventually provide some stability to prices in the near future.  It appears that the annual sales total will be roughly the same as 2018 which was a very low annual sales year.

For the first time since January 2018, we will see a negative change in year-over-year Total Inventory.  Up until April of 2019, it was difficult to see this happening so quickly (including myself).  Rather than seeing sellers panic, we instead saw a very resilient homeowner group that has chosen to stay-put and wait out the market.

For those of you looking to see into the future, one should compare the TI trend between years 2013 and 2019.  Years 2013 and 2019 are both years following a bear market. The changes in TI month-over-month in 2013 and 2019 have been virtually the same this year.  If this continues, one can expect the TI to drop under 9,500 by the end of the year.

It is very possible that the TI trend in 2020 may follow the trend in 2014.  This is assuming that the Justin Trudeau's Liberal government doesn't go ahead with changing the mortgage rules to favour the sellers and increase buyer frenzy.

I have spoken for several months now about the struggling Total Inventory since May due to extremely low New Listings.  This trend continues on for another month but don't be surprised if this  comes to an end soon.  All trends come to an end and we may now start to see New Listings come back up to normal levels (or possibly higher).  It is hard to draw any trends from what happens in November or December as they are dead months for new listings (see chart above) but one can expect the new listings to rise in the new year as many sellers return to the market.

With the MOI now safely under 7 months for 4 months in a row, it is safe to say that we are no longer in the buyer's market.  One may point to the fact that the prices are still on a decline which is true for many of the sales currently.  For an experienced investor, one may take advantage of a situation like this where discounts may be readily available across the city at a time when the MOI is recovering into the balanced territory.

Seller's Market: Under 4 months

Balanced Market: 4-7 months

Buyer's Market: Over 7 months

De-listings for this month will break the typical October trend and fall.  This is fairly unusual for October and has only occurred twice (2011 and 2017) since 2008.  This is due to the higher-than-expected sales for October, 2019.

September, 2019: REBGV Data

As my projections from middle of the month was spot on, I will not be reposting the official end-of-the-month REBGV charts.  Please see below for the mid-month September projections.

REBGV September 2019 Projections

Sales projections show that the sales are now back to the typical 10-year average.  It is worth noting that it was a remarkable run from February 2018 to June, 2019 as it stands as one of the longest buyer's market period that the Vancouver market has seen in the last couple of decades.  It has caused a significant ~10% drop through Greater Vancouver with the west side experiencing greater drops and the east side experiencing less.  

Total Inventory is expected to stay level this month much like many other years that were balanced years.  It is now almost at the same level as a year ago which is a fairly significant statement given the record number of housing completions over the last 12 months.  It is expected that we will see a reduction in year-over-year TI for the first time in October, 2019 since January, 2018.

Nothing has been more disappointing to watch than the New Listings as it continues to struggle 4 months in a row.  This is having a significant impact on the Total Inventory without any doubt.

The MOI is projected to inch lower in September in what will be known as the largest month-over-month decrease in MOI for the month of September.  MOI typically increases month-to-month in September as it has lower number of business days than August.

Buyer's Market: > 7 months
Balanced Market: 4-7 months
Seller's Market: < 4 months

August 2019: REBGV Data

As my projections from middle of the month was spot on, I will not be reposting the official end-of-the-month REBGV charts.  Please see below for the mid-month August projections.

REBGV August, 2019: Projections

Sales will trend down this month as oscillating sales continue for 4 months in a row.  But there are signs that the wide variations are about to come to an end and that we are more likely to see a flat sales trend as we head into the fall season.  One can expect the sales to remain low for the rest of the year in the low 2000's for the next 3 months.

TI will trend down again for 3rd month in a row.  September is the last chance for a TI rise before the end of the month.  Should it fail to rise in September, TI increase that we've enjoyed for the past 1.5 years will come to an end.  This is surprising given the all-time record broken this past year for New Housing Completions.

New listings are under the 10-year average for 7 months in a row and will end up at a 9-year low for August.  This is exactly the reason why TI continues to drop despite low sales.

MOI is virtually at even with years 2013 and 2018.   Nothing interesting about this chart for August but will September bring the kind of rise we saw in 2018 or will it land in the balanced territory again?

Buyer's market > 7 months
Balanced market 4-7 months
Seller's market < 4 months

It looks like record de-listings that we were seeing earlier this year is now coming to an end.  But will some of these come back in September at lower prices?  I hope so...  If we don't see some New Listings recovery in September, we will have to wait until next year and that is a long way to go.

REBGV July, 2019: De-Listings

De-listings have been above 10-year average for the last 16 months but it seems to have had minimal impact on new listings so far.  Only time will tell when the new listings will eventually pick up from record high de-listings seen over the course of last 16 months.

REBGV July, 2019: Months of Inventory

Months of Inventory (MOI) has dropped under last year's value.  This is the first YoY drop in Months of Inventory since January of 2018.  However, this could be short-lived as sales typically drop in August and it could increase MOI back to the positive territory YoY in August.

Recent observation of the Vancouver market has shown us the following:
MOI under 4 months = seller's market
MOI between 4-7 months = balanced market
MOI over 7 months = buyer's market

This is a new adjustment.  I previously followed REBGV's suggestion that the balanced territory is between 5-8 months (SAL between 12-20%) but recent data suggests that the balanced market is more between 4-7 months (SAL between 14-25%).

REBGV July 2019: New Listings

New Listings again remained low for the month of July and was the lowest since 2010.  There has been record-setting number of de-listings seen since late 2018 and for it to not translate to re-listings in a huge manner in 2019 so far is certainly disappointing.  The sellers appear to be in the holding pattern but how long could this possibly continue?  With 2 days in the record books in August, the August New Listings number again appears to be heading south...  More to come...

REBGV July, 2019: Total Inventory

Flashback to April, there was every indication to believe that we were headed for a 2008-like TI increase with record breaking low sales occurring at that time.  You will see from this chart that the TI was nearly identical in April between 2008 and 2019.  But rather than following the '08 trend, there is now a ~5k difference in inventory between this year and 2008.

With another drop of 400 inventory on the 1st day of August due to month-end expirations, the TI is heading toward mid-13k (without empty lots) by the end of August.  If this trend continues, there is a good chance that this year's TI will be at parity with last year's TI by October or November.

I previously predicted that the TI would peak in September this year as this was a buyer's market but it appears that I will be wrong on that prediction.  Now, it seems very unlikely that September's TI will top June's peak for this year.

REBGV July, 2019: Total Sales

We have not seen such month-to-month variations in sales that we've been seeing over the last 3-4 months in recent history.  As to what is causing this fluctuation is unclear aside from June having less business days than May or July in 2019.  Even taking this account, the fluctuations are still quite pronounced.

A political interference can cause abrupt changes to the market but there has been no recent political policy change that was designed to affect the Vancouver market.  The recent announcement by the Federal government to aid first-time home buyers are designed to help first-time buyers buy into housing under a certain price limit that is too low to affect the Vancouver market.

At this point, it's not clear what the real trend is.  Is the Vancouver market returning to balanced territory or is July a fluke?  What will happen in August and how does it influence the market going into the fall?

What we do know from the past 10 years is that the sales dropped month-to-month in August 9 out of 10 times.  The infamous 2017 was the only year when we saw an incline month-to-month but it was a very small increase.  One can easily deduce here that the sales will likely fall to 2,000-2,300 range in August.  With TI expected to drop in August to mid-13k (without empty lots), we can expect the SAL ratio to be in the 14-17% (balanced territory) in August.

REBGV July, 2019 Projections: Months of Inventory

This month's MOI will be very close to last year's MOI in July.  This marks the first time that year-over-year change in MOI has been this even since February, 2018.