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Inventory up, Sales down - March 25th update

Blog by Shaun Kimmins | March 25th, 2010

The market has cooled

As expected as of March 25th active listings are up and increasing daily. The odd thing is that sales are down. An increase in active listings was certainly expected this year but what is a bit of a surprise, especially given the frenetic pace of sales through December 2009, is the recent lack of sales. In an typical Vancouver year downtown condo listings usually do begin to increase in advance of sales. However, the margin between the two has widened dramatically during the past 2 months, leaving us with between 6 and over 50 MOI (months of active inventory = active listings divided by the # of sales over the last 30 days) across the price categories listed below.

Here are the numbers, taken from MLS March 25th 2010:

Monthly sales Update March 25th 2010.jpg

Perhaps this shouldn't be too much of a surprise given the scale of the Olympic disruption but consider that we are almost a month past the end of the games, sales remain sluggish and the imminent threat of rising interest rates has yet to get buyers off the fence - this is the puzzling part. One would expect there to be a rush to lock into purchases as soon as possible especially when you factor in the recent statements and media surrounding Mark Carney's latest comments concerning the Bank of Canada's position on interest rates as it relates to "surprisingly" positive inflation numbers reported this week. 

Rates to rise

It's no secret that Canada's recession was shallower than that of many other countries and that its recovery has been similarly speedy. Mr Carney originally assured Canadians that he would not raise rates before June 2010. He appears now to be struggling with that assurance which has recently been categorized as "conditional". He appears to be wrestling with the choice between personal integrity and doing what is necessary to control inflation to prevent a Canadian housing bubble and runaway inflation.

What does this mean for you?

So what does all this mean for "housing" and more importantly, your condo value? Well, that's clearly very complicated and difficult to predict and only time will tell. However, some things are clear. Affordability is once again a key issue. Sellers will simply not be able to continue pushing list prices into the wild blue yonder. Buyers are execising caution and the market mania that epitomized the second half of 2009 appears to have finally abated. This means sellers will need to price for the current market and decide whether they are truly motivated to sell. Listing at unrealistic prices will only exacerbate the current supply and demand issues and encourage price competition - negatively affecting your future resale value. The bottom line is this: List only when you have decided to sell and list at a price that will actually sell. Employ an area expert to list your property.

Where do I see the market risk?

I currently see two major risks:

1. Motivated, over-leveraged sellers begin slashing prices to get their listings sold. This has begun already. For example, out of 28 new listings at The Fairmont Pacific Rim, 8 sellers have already adjusted their prices since listng last month. If a pricing cascade occurs, as was witnessed at Shangrila, it won't be pretty.

2. The Millenium Waterfront - Vancouver is on the hook for close to a $Billion and will probably want its money back sooner than later. The pressue is on to get those units sold (I have heard there are some 750 still unsold) and in a market where the HST is looming large as of July 1st, with only 3 months to offload an Olympic-sized invenntory of property, I see only one way to get buyers buying in this quiet market and that's - PRICE. If prices begin coming down on this brand new product, resale values are sure to follow.

When will the market wake up?

I hope it will be imminently. We didn't see much activity in 2009 until after April so 2010 is a repeat, we still have time. When interest rates do increase, buyers with 90 rate-holds will still have time to lock into a purchase. As a result we should see sharply increased sales activity shortly after rate increases are announced. This will likely happen sometime between now and June. If Mr Carney is kind to the housing market and waits until July, we should see healthy sales through Sept and Oct, again assuming buyers have applied for a 90 day rate-hold.

What do I recommend? - Patience

Not withstanding the risks I have outlined above, it's simply too soon to judge the year as a whole and too soon to act rashly. I encourage patience and caution. I am watching activity levels and speaking with market participants daily. Rest assured we will get your porperty sold for its maximum value and I'll communicate market changes to you as I see/hear them.

Please contact Shaun directly shaun@shaunkimmins.com to discuss whether it's a good time for you to buy or sell and please feel free to comment on this or any of my other Blogs or visit me at my Century 21 In Town Realty website.