Greater Vancouver detached properties fails in the latest attempt to surpass the two million price barrier. Even as prices reach their highest point in history of $1.982M during June, the average sale price is barely above the aggressive uptrend. The pending break to the uptrend will result in a market reversal and the reemergence of price volatility. In addition to the pending trend reversal, the sales totals have greatly diminished from their recent all time highs experienced in March. 

Another abating factor to future price increase is the rising inventory levels as homeowners look to reap the benefits of the sudden 24% increase to the average sales price over the past 12 months. Typically as home values increase, so do the listings. 

As the current uptrend comes to a likely end, home values will begin to consolidate their recent gains. The obvious question becomes how low will values go? Eitel Insights anticipates a tepid 8% - 10% correction to occur. That implies values to peak around the $2M barrier and will backtrack to $1.830M the previous market peak. There is a possibility that values take a sharper downturn, as the market did not accrue the $363,000 year over year increase based on natural market behaviour. Instead values were artificially boosted by historically low interest rates, the BoC bailing out the secondary mortgage market which in turn supported the banks and CMHC. This allowed the banks to offer mortgages to the sudden monumental spike of demand for detached properties born out of the pandemic. Should the average sales price break back into the previous market cycle below $1.830M, values would very likely find their bottom around $1.725M (-13%). 

Even though average sale prices increased out of “unnatural” market factors, there is no mandate that says values will come back to their “rightful” values, if there is such a thing. Instead of values tumbling back to affordable prices, home sale prices are likely to take a temporary pause before the next major push higher. As evidenced by the last sudden 22% increase during June 2013 ($1.120M) to February 2014 ($1.367M). The rapid uptrend was unable to sustain itself for a prolonged period of time. After values peaked in Feb 2014, there was a correction of 13% by July 2014 ($1.184M), and home values did not surpass the 2014 price peak until the following February ($1.402M). While the 2014 break out was a false break, the following year of a market consolidation was the last opportunity to purchase before another major increase to $1.816M in January 2016. The resulting growth phase from July 2014 ($1.184M) to January 2016 was a substantial 53% increase . 

Similarly, Eitel Insights anticipates a major price injection after the pending market lull. A market driven growth phase typically ranges from 40 - 56% price increase over the past 16 years. The conservative side of the range implies values could reach as high as $2.8M (41% increase) during the next growth cycle. The next growth cycle is likely to occur as immigration returns in a big way, including international investors. Rising interest rates will spur on another phase of FOMO as interest rates increase, the buyers will be eager to purchase before further escalation occurs. 

The reopening of interprovincial travel, and the lifting of covid restrictions undoubtedly had a negative effect on total inventory during June. June’s 4,781 active listings signalled the first decline since December 2020 with only 2,762 active listings, the lowest total on the chart. Equally important the current level of active listings is similar to the August 2020 peak inventory of 4,823.

Inventory levels have historically peaked during the summer months, however over the several years the trend has been for inventory to peak during August or September. This is likely to be the case for 2021, as potential sellers list with eyes towards selling their properties at peak values.

Sales have fallen back from their near term highs of 1,973 during March 2021, June finished with 1,272 completions. Well above the preceding three year sales channel of sub 950 sales in every month (2017 - 2020). With sales returning inside of the historical sales channel, the data will likely find support thanks to the upturned in the near term, as inventory levels have evolved to peak later in the year, so has the sales yearly peaks. As the inventory rises during the last summer and early fall, sales will likely take another leg higher, before dropping below the current uptrend during winter. 

The supply demand metrics continued to narrow from the extreme demand driven market during March 2021. Demand has shrunk from a 2.296 level to 0.528 while the supply has risen from -1.357 to -0.680. Resulting in the demand driven gap to decrease 56% from 3.653 in March to 1.208 in June 2021. 

The perfect storm of historically low inventory coupled with immediate demand for larger accommodations and ultra low interest rates is beginning to fade from the current market behaviour. Consecutive months of record setting new listings data has the inventory levels on the rise. Resulting in home values which had been exponentially increasing is beginning to slow.

Active listings have risen over 46% in the past two months. From the total inventory of 3,126 in February 2021 to 4,588 during April 2021. The sudden rise of inventory has led to a break of the initial downtrend (red trendline). As the available properties continues to rise throughout the spring and into summer months prices will likely begin to move sideways. Eitel Insights looks for the inventory to challenge the next downtrend (yellow trendline) which implies inventory rising to 5,700 during the peak months of 2021. 

Home values did increase once more but the average price was only able to increase by $14,000, the lowest price increase since May of 2020. Home prices during May 2020 were averaging $1.586M, by March 2021 the average price had increased to $1.958M. That increase implies an average growth of $37,200 each month over the previous 10 months. The nominal price increase of $14,000 from March 2021 to April 2021 rose the average price for a home inside of Greater Vancouver to $1.972M, just shy of the illustrious $2 million price bracket.

Evidence of the average sales potentially reaching the near term highs is the data that comes from the advancing declining stats. When comparing the individual 20 areas which make up Greater Vancouver. Using a month over month comparison the past month of April realized 9 areas inside of Greater Vancouver where the average price increased, but had 11 areas declined. That marks the first instance, over the past year, where the declining areas outnumbered the advancing.

As home values begin to reach their apex of the growth phase, the inevitable ebb to the recent markets flow, will result from the rising inventory environment coupled with stricter lending policies and an interest rate that is no longer at historically low levels. The natural barrier of $2M for the average home in Greater Vancouver will likely hold as a new artificial ceiling.

The possibility of a 8-10% correction after the peak occurs is realistic. That would imply a retests the previous market cycle high of $1.830M. To expect prices to correct below the previous channel is an unlikely outcome. More likely is an evolution out of the growth trend which increased home values over $386,000 to a period of sideways action, as price discovery confirms the previous technical break out.

Clients and followers of Eitel Insights analytics will remember our initial published article in 2017 using technical indicators to call the top of the Greater Vancouver housing market. Subsequently the home sale prices corrected 20% during 2019. The upcoming sideways action will not likely result in a major correction as the last cycle offered. Reason being the Bank of Canada created the artificial floor to home values when they instigated the the Canadian Mortgage Bond Purchasing Program in 2020. (See past article for details regarding the CMBP)

Sales continued at a high pace during April with 1,667 completed transactions occurring. Over the past two months the sales achieved over 3,600 deals. That many transactions in a two month period has only occurred during 2015 and 2016 frenzied market conditions. Key thing to remember all good things come to an end. Homeowners looking to capitalize on the high priced environment may want to list sharply. As the inventory continues to build some of the exploitative tactics that are working for sellers may be coming to an end. 

Yet another record month for the Greater Vancouver housing market. The average cost to purchase a detached property inside of REBGV increased by $89,000. Bringing the average to $1.958M. This was aided by the continued high sales totalling 1,973. Accumulating the second largest sale total in the history of Greater Vancouver real estate. In attempts to capture the newly minted growth phase in home prices, sellers came to the market in droves. Setting the new record with 3,368 newly listed detached properties in March. The record amount of activity to kick off the spring market is likely to continue as March through May are typically the busiest months of the year.

Home sale prices continued their escalation beyond the previous market cycle. Amazingly, another $89,000 was added to the average sales price from the previous month. The new record price of $1.958M represents a 7% gain over a two month span. The 7% growth is the first increase above the previous market cycle which had held home values range bound for 5 years.

The biggest gainers this past month were Pitt Meadows up an incredible $233,000 month over month, representing an astonishing 20% increase. The average property in Pitt Meadows is selling for $1.44M. Vancouver West rose $500,000 up 14%, bringing the average price to $4.025M. The standout of the gainers over the past two months is Whistler. This past month over $600,000 was added to the average price. Couple that with the $900,000 increase from the month previous, and Whistler has increased over $1.5M in just the past two months. The recent spike in value has increased the averages price to over $4.325M for a detached property in Whistler. The massive increases to these areas have aided the REBGV average price to gain distance between the price point and the aggressive uptrend instigated during July 2020. 

Breaking beyond the 5 year price boundary has been clearly aided by the supply demand imbalance. March 2021 just recorded the second largest imbalance between the two market metrics on record. The total gap between the supply versus demand during March was 3.6. Falling just 2 basis points below the all time high which occurred during March 2016 with a 3.8 gap. Interestingly, previous to the past month the second largest discrepancy occurred during April 2016. This implies buyers are unlikely to receive any reprieve in the short term. 

As forecasted over the previous months, sellers are entering the market with full force. A record setting total of over 3,300 properties were listed in last month. March 2021 represents only the 4th instance where new listings accumulated over 3,000 in a single month. Should the high new listings count continue to rise through spring and into the summer months, home values will likely realize a near term price peak during the summer.

Even with a record amount of new listings, the total inventory continues to remain in the doldrums of the chart. A glimmer of hope would be the total inventory of 3,886 is attempting to break out of the 3 year immediate downtrend (Red trend line). Established during June 2019 when there was over 6,700 active listings. The enormity of new listings only resulted in a net of 880 total active listings compared to the previous month. However should inventory continue to grow a the 29% as was the case in March. The key figure of 5,700 active listings is well within reach by the late summer, or early fall. 

Sales fell just short in completing a trifecta of records during March. The 1,973 sales were only 177 shy from the all time high achieved during March 2016 of 2,150 sales. With the abundance of new listings coming to market, the buyers snatched up the choice properties, and continued in the bidding war mentality which pushed the average sales price to over 101% of the asking price. This is only the 9th instance in which sales price was over 100% of the asking. Of those previous 8 instances they all occurred between December 2015 - July 2016. Implying the next several months of data could result in a continuation of the sales prices being higher than the asking prices.

Importantly, all subsections of the market are now selling. Over the past year the entry level homes have been selling at a frenzied pace, that has worked all the way up to the luxury market. March realized 49 properties that sold over $5M. The 49 sales is an increase of 250% compared to the preceding 3 year average of 14 sales per month. The prices of the luxury market is still not quite back to the peak conditions of 2017. As the averages sales price was $8.6M. However the average sales price in March of $7.6M, is up over $1.6M from the low recorded in May 2020 of $6M. 

For the first time in 5 years the two heavyweights of the Canadian housing market have broken above their previous peaks. Both real estate market values are now in uncharted territory, implying a new growth cycle is in its infancy.  The new highs created in February were $1.869M in Greater Vancouver & $1.684M in Toronto. For the home values to remain in growth territory it is likely that prices will stay in close contact with their uptrends which have supported prices to their current lofty levels. 

However in Greater Vancouver the supportive uptrend is close to perpendicular. Such aggressive trends are challenged to hold in place for very long. Implying the recent $267,000 price increase over the 7 months is not a sustainable growth pattern. In the City of Toronto values have risen well above the long term uptrend which instigated during the creation of their market cycle low. In the past 3 months alone home values have shot up a dramatic $208,000 according to the average sales price, which is again a nearly impossible trend to persist for any length of time. 

What spurred on the torrid price increase, in the middle of a pandemic? The instant increased demand for a larger building footprint was very apparent. More importantly but less obvious was the banks ability to issue new mortgages to the increased applicants. This was enabled due to the Mortgage Bond purchasing Program (CMBP) introduced by the Bank of Canada (BoC) beginning in March 2020. The Bond purchasing Program enabled the BoC to purchase up to $500 Million in secondary Mortgage Bonds per week. By July there had been over $6.2 Billion of mortgage bonds bought on the secondary market. 

The Bank of Canada routinely purchases Mortgage Bonds to balance there assets. However they historically have solely bought Mortgage Bonds on the Primary market. The creation of CMBP was so the BoC could purchase on the secondary (resale) market.

Why did the Bank of Canada step in and purchase on the resale market for the first time? Simple answer is, no one else would. That would have left the secondary market dealers with their hand full of existing mortgages on their balance sheets, in turn the banks books would have remained full. That would have led to much tighter mortgage funds available, during the influx in applications. The Bank of Canada jumped to action and “supported normalized markets”. The odd thing is, the amount of funds offered to the mortgage market during the pandemic compared to the governments relief to other sectors. The amount of secondary Canadian Mortgage Bonds purchased was two times larger than the Canadian government COVID 19 support for individual sectors. For comparison sake, $8 Billion to support the mortgage market but the entire Air Transit Sector received $331Million.

The guarantee that the Bank of Canada was going to “support normalized market functions” to the tune of $500M per week, during a abnormal period of time, created a no fear environment for both the secondary mortgage market dealers and the major Canadian banks.. The banks newly found confidence, coupled with historically low interest rates created the environment for recent insane price increases of $267,000 in Vancouver and $247,000 in Toronto over the course of just several months. Even as homes values were increasing $100,000 or even $200,000 over the most recent comparable, mortgages were approved with ease. The Canadian Bond Mortgage purchasing Program came to its conclusion during October 2020 after expending over $8 Billion. 

As the potential free fall of the mortgage bonds was not allowed to take place, an artificial floor was created by the BoC. The creation of the bond market floor encouraged other investors to step to the plate since the entire Bank of Canada would essentially need to collapse in order for the mortgage bond resale market could go any lower. Akin to the 08-09 recession when the US Federal Reserve said that some banks will not fail, as they did with Bank of America, the stock was in free fall until that announcement.  Similarly when the secondary mortgage market was positioning for further losses, the Bank of Canada said real estate will not fail.

It wasn’t as if home values were down immensely already and could not withstand further losses. The Greater Vancouver housing market was around $1.6M (-12% from peak) during January - July 2020. The market cycle low already been established during early 2019 when home values had dropped to $1.486M (-20%) from the 2017 peak value of $1.830M. Without the 8 Billion influx, the market would have found it near impossible to have achieved the current values. 

Similarly in the City of Toronto, the average home is selling for the $1.684M. That is up $247,250 when compared to the initial 6 month average of 2020. As with Greater Vancouver the City of Toronto had already found its market cycle bottom of $1.145M during December 2018, implying a drop of -27% from the peak which had occurred during April 2017 at $1.578M.

The goal of the Bank of Canada with the creation of the CMBP was to offer support in order to normalize market functions across Canada. The goal was not to create frenzied environment, but since Greater Vancouver and Toronto housing market have a tendency to be frenzied with frequency, and both market had been stagnant for over 4 years. By enabling the bidding war environment to return; is, in some weird way, supporting a return to normalized markets in the two major Canadian real estate markets.

You might be ready to buy, but good luck finding anything available on the real estate market right now.  Record low supply has resulted in prices reaching higher than anticipated, but how much longer can this continue?

Guest: Dane Eitel, Founder and Lead Analyst at Eitel Insights.

Host: Simi Sara, Mornings with Simi CKNW 980

Link to full interview: https://omny.fm/shows/the-simi-sara-show/prices-surge-as-market-supply-low

Detached properties across Greater Vancouver have risen over 14% in the past 12 months. January began 2021 with an average sales price of $1.814 Million. Just 1% below the historical high of $1.830 achieved during May 2017. 

Technically speaking the 14% increase uplifted values from the middle threshold to the peak. During 2016 - 2017 multiple attempts to increase home values beyond 1.830M had failed. Can the current market conditions hold tight to surpass the our previous highs? Possibly, but very little room for error. Inventory would have to remain at abysmal levels, interest rates remain around 1%, stimulus needs to keep flowing and the sales totals have to remain or improve. Any wavering of inventory, interests rates, stimulus, or sales and the market could reverse the current trajectory.

For comparison sake you will notice in the chart below the dramatic difference between the supply and demand metrics of 2016-2017 and todays market environment. 

Other analysts tout the how strong the demand was during 2020. The supply & demand chart does not corroborate their claims. The less than average sales totals was enough to completely overwhelm the anemic inventory.

During the initial market peak during 2016, sales which translates into demand, were through the roof and recorded a 2.805 data point while the supply was worn down to a -1.160 data point. The supply demand spread during 2016 was an impressive 3.965. During January 2021, the demand data point comes in at -0.7625 and the supply sits at -2.088. resulting in a 1.827 spread between the two market metrics. This leads to a straw which broke the camels back scenario, if the inventory returns, it is unlikely the demand will be able to continue to out pace the supply, which would have a deleterious effect on sale prices. 

As a result of the increase to the average home sales price, sellers could return with gusto during 2021. With multiple offers prevalent again, owners who put selling their property on the back burner during 2020 will likely revisit the notion of listing. Owners looking to downsize have an amazing opportunity as the average detached home now sells for over 2.5 times more than the average condo. This is the first instance in 4 years where the divergence of the average detached property has reached over two and a half times the value of the average condo.

For an example longtime owner of a Vancouver East home, can sell their property on average for $1.827 Million. The average 1 bedroom condo in West End is selling for $533,694. That implies the sale of a single detached property would enable you to buy 3.4 West End 1 bedroom condos. 

What makes this example intriguing is if one chose to downsize they would be selling their East Vancouver home at the peak of the Vancouver East market’s cycle. The purchase of the West End condo is currently selling at a 21% discount compared to West End market cycle peak prices. The 21% discount on each 1 Bedroom condo is akin to savings of $140,000 per purchase resulting in over $420,000 savings on the 3 condo properties. The $140,000 savings per purchase is nice but also the timing of the Vancouver East property would net you over $250,000 additional proceeds compared to January 2020. Add it all up and one could have netted $670,000 in gains, through selling at market peaks and purchasing during the market lows. 

Just one example of the many opportunities that exist for home owners looking to downsize. Get in touch with Eitel Insights for your individual actionable intelligence market analysis. 

Inventory through January broke above 3000, which is the lowest data point on record. 2020 finished the year down 28% below the yearly historical precedent. January 2021 begin the year with 37% less inventory compared to 16 preceding January data points. That said the aggressive downtrend (red line) which began in 2019 will likely be broken during 2021. If inventory can amass another 1000 active listings to break the 4000 level in the next few months, the market could become very interesting by the summer. 

Sales dipped back into the sales channel that held the market during 2017- 2019. The January sales were 751, the highest total since 2016 when sales totalled 1,049. Compared to the preceding January average sales began the year up 19%. 

Individual markets vary, contact Eitel Insights to gain actionable intelligence about your neighbourhood. 

Article Written By: Joanne Lee-Young

Link to Full Article:

https://vancouversun.com/business/vancouver-real-estate-low-supply-behind-price-increases-for-detached-homes

Comments and data quoted in article:

Analyst and real estate agent Dane Eitel said one important nuance to see is that in 2015, the inventory of detached homes in Greater Vancouver was 57,308, but there were 17,372 sales. In 2020, the inventory was 50,225 homes, but there were only 10,832 sales, which is down 15 per cent from the 15-year average of 12,748.

Between 2005 to 2019, the total yearly inventory average was 70, 082. So in 2015, the inventory number was 18 per cent lower than the 15-year average, but in 2020, it was 28 per cent lower.

It means the increase in home values in 2020 was less about sales and demand — and even interest rates, which were also low in 2015 — and more about a scarcity of inventory, said Eitel.

The difference could be important if home prices edge back up to 2016 levels even though “the economy is not recovering nearly as fast as the housing market would indicate.”

The COVID-19 vaccine might ease health concerns for sellers who are currently happy to hold their detached homes. They might be motivated to list their homes and take the gains if prices continue to rise spurred on by low inventory that is so historically low, it will take some time to ease, said Eitel.

Link to Interview with Reporter Tyler Orton of BIV:

https://biv.com/video/making-sense-real-estate-market-2021

Making sense of the real estate market in 2021

The Metro Vancouver real estate market made a giant splash throughout 2020 despite all the economic uncertainty. But is this sustainable? Dane Eitel of Eitel Insights joins BIV Today to discuss how the market kept chugging along and what’s in store for the coming year. Reporter Tyler Orton hosts.

January 8, 2021 | 3:02 pm

Article Written By: Antonia Cundy

Link to Full Financial Times Article Article:

https://www.ft.com/content/341fd1ee-d9e4-474a-8b80-46a8b39ce105

Eitel Insights recent condo market update made it across the pond. A recent article covering the Vancouver Condo market features comments by Dane Eitel. See a few of the statements quoted in the article below.

How Covid-19 caused Vancouver’s Condo Conundrum

“It’s not normally like that, the condo and detached markets normally move in lockstep, but that demand to live in a detached house with a yard has meant they’ve taken completely divergent paths this year,” says Dane Eitel, founder of real-estate analytics company Eitel Insights.

This slide in prices is likely to increase further, Eitel says, as new-builds come to market in the next year. “I actually see the condo market inventory increasing because we’re seeing the completion of these buildings that people bought as investments years ago.

“What that ultimately leads to and has already led to downtown is a cannibalisation factor,” he says. “You see those older buildings have to reduce their prices quite aggressively to get a sale and then the newer ones have to reduce their prices too.”

“We have a large rental base here and now because of Covid there’s no need to work downtown. The exodus from the condo market has been real,” says Eitel Insights. “So now owner-investors have no rent covering their mortgage, so they’re either looking to get out or they’re looking to stem losses.” This slide in prices is likely to increase further, Eitel says, as new-builds come to market in the next year. “I actually see the condo market inventory increasing because we’re seeing the completion of these buildings that people bought as investments years ago.

The Greater Vancouver real estate detached market was seriously deprived of inventory during 2020. Resulting in the lowest amount of homes for sale in the past 15 years. The total amount of available detached properties achieved just 50,225. Which is down nearly 30% from the 15 year average of 70,082. 2020 was by far and away the lowest total active listings. Recent history shows during 2016 there was 58,650 active listings, 2017: 65,974, 2018: 75,459, 2019: 69,630. Comparing 2020 to 2018, there was a drop of 33% available properties.

Some analysts believe the increased prices were due to the increased demand, we disagree. The 2020 total sales completed with over 10,800. This data point indicates an increase compared to the previous 2 years of data but well below the 15 year average of 12,748 sales.

Eitel Insights believes the increased prices resulted directly from anemic levels of inventory, along with lower interest rates, which resulted with increasing home values. The statistical anomaly of not being able to surpass 5000 active listings in any month during 2020 will not likely occur again in 2021. The increase to the number of mortgage in arrears will likely result with increased inventory, due to need based sellers. Add in the struggling economy with continually increasing personal debt, just as government stimulus wanes.

All in all, there is a possibility the market can sustain current pricing levels, if the inventory does continue to buck historical norms. The more likely outcome is inventory increases along with a diminished demand for the detached homes, due to the pulled forward sales which occurred during 2020.

This low level of inventory combined with sudden demand to own a detached properties combined for the perfect storm and forced prices the highest price of 2020 during December. Achieving a 1.770M average sales price across Greater Vancouver, the highest sales price since May 2018. During the upcoming year, if inventory remains virtually non-existent, prices can be sustained into 2021.

As the majority of detached homes are owner occupied, the thought of having buyers come through your home during the pandemic was not acceptable to most. Even though prices increased over $190,000 from the May 2020 low of $1.586M to over $1.770M in December. The inventory hit its 15 year low of just 2,762 active listings in December 2020. Typically inventory increases as the prices rise. With prices back into the upper third of the current market cycle, and a vaccine en route, the notion of selling will become acceptable again.

Those who are willing to list will reap the rewards, the December low data point not only broke below 3000 active listings for the 2nd time in 16 years but the data broke the longer term uptrend which was established during 2015. Is the historic low of December due to the recent shutdown measures imposed by the government or will the low levels persist?

The data accumulated in the initial 6 months of the 2021 market will likely set the tone for years to come. If the inventory remains at extreme lows, prices can be sustained at the current level with a possibility of achieving a new all-time high. If this occurs, the growth cycle will have been born through the lack of supply. We anticipate this to be the less likely scenario of the two. Longer term, yes, prices will eventually escape the market cycle that Vancouver has been in since 2016, but in the short term we believe the impact of a deteriorating economy will force the home prices back lower in the market cycle to test previously established price points.

Interesting point, when there is an anomalous low data point, the market historically reacts with a much higher set of data, in an effort to counter act the anomaly. This implies inventory could rebound heavily in 2021.

Prices were volatile during 2020. Home values began the year with an average sales price of 1.590M in January. During February there was a spike higher with the average sales price achieving 1.710M. After the first lock down, prices fell back to 1.586M in May. Then like a shot out of a cannon, home values rapidly increased back up to the February high and beyond. With the December price reaching 1.770M that indicates prices have re-entered the upper third of the market cycle, only down 3% form the all-time high of 1.830M experienced during April of 2017.

Home values rose due to the serious lack of options, the peak of inventory during 2020 could not rise above 5,000 active listings. In the past 16 years, 2020 was the first instance where not one single month of active listings was able to achieve above 5,000 detached properties for sale. The limited inventory forced buyers to compete with each other for the very few new listings that came out each month. Until inventory begins to dramatically improve, prices will have an artificial bottom which could propel the market higher.

The detached market finished 2020 with over 10,800 sales. A relatively high number considering there was only 393 sales during April 2020. This unusual activity given historical seasonal norms, meant the spring market was pushed into the summer, summer to fall and so on.

Taking the year as a whole, rather than using year over year monthly indicators which were heavily affected by the initial lock down, the data become much less impressive. Sales rose to 10,832 during 2020 which is down 15% from the 15 year average of 12,748. The 2020 sales were higher than the 2019 & 2018 totals, but below the 2005, 2006, 2007, 2009, 2010, 2011, 2013, 2014, 2015, 2016, and 2017.

Greater Vancouver detached achieved the 5th lowest sales total in the past 16 years. Again to the earlier point, the increase of home values during 2020 had less to do with the sales, and everything to do with the inventory.

Going forward the key to the detached market can be reduced to one factor, supply. With home prices back up to the 2016 levels coupled with an economy is not recovering nearly as fast as the housing market would indicate. The Covid vaccine is seemingly on the way, coupled with higher prices than 2019 and 2020, owners who put selling their property on the back burner, may refocus during 2021. Again the current inventory is only at 2,762 signalling the lowest level on the 15 year chart. This creates an excellent selling opportunity for home owners.

Mortgage in arrears have increased 22% since Eitel Insights indicated a rise was imminent. That is only a tenth of the anticipated increase to occur over the upcoming years. Rising mortgages in arrears does not make the market go lower in and of itself. Rising numbers or delinquent mortgages is a symptom of the BC real estate market in decline and a weakened economy.

Evidenced by the chart, this is only the third time in four decades that delinquent mortgages were this low. In every instance previous once the data broke above the low resistance level, mortgages in arrears rose dramatically. Simultaneously the home prices across greater Vancouver declined. The most recent example was 2008 – 2009. The recession was short lived, due in large part to the winter Olympics of 2010 coming to town. That made it nearly impossible for the economy to slow down for long. However a 21% recession still managed to occur even during the short time frame.

The 1990’s prices peaked in 1995 and subsequently declined for years. The ultimate bottom occurred once prices dropped over 26%. Prices did not achieve a higher price until 2004, a 9 year market cycle. That cycle was fueled partially due to the mortgage in arrears produced by a weakened market.

The mortgage in arrears data is accumulated across BC, however in the current market place most of the outlying or tertiary markets are outperforming Greater Vancouver as the exodus from city centers continues. That would imply many of these newly upcoming additions to the delinquent mortgages will be from right here in the highly volatile Greater Vancouver market.

The cold hard facts of the current market decline appear to be at odds with many bullish headlines. That is because the Real Estate Boards continue to paint a rosy picture in order to find a positive sounding headline. Recent example: “Highest October for sales in decades”. While true, a perfect example of a half-truth.

October has never been a high-water mark in any year previous… ever. Comparing strictly historical October data in order to come up with a fantastic headline is simply too big of a pill to swallow. The high data point of 2020 is October, compared to previous years high-water sales data, 2020 was no more than average. Hearing the excitement over average data points, we believe the next phase will lead to sincere weakness, as opposed to tepid strength, reported as herculean. In the sales chart below you can see the “historic high month of October 2020” is smack dab in the middle of the 15 year chart. To get a true historic high data point one would have to discount 177 other months of data leaving just the 14 previous October’s.

The question is, based on the data, what will occur next? The first six months of 2021 will be crucial, as detached home values based on a 5 year term will be underwater. The initial peak of the detached market occurred during the initial two quarters of 2016. Over that time the average price was $1.790M and 11,400 sales occurred in Greater Vancouver. The overwhelming majority will be up for the 5 year mortgage renewal in the first two quarters of 2021.

The 5 year fixed interest rates have decrease substantially from 2019 when interest rates were around 4%, according to Statscan. Current rates are 2.24%, a significant difference. However compared to the 2016 levels the change is less significant, actually barely noticeable. The first 6 months of 2016 interest rate average was 2.62% making the current interest rates decrease an insignificant factor for those about to go through the renewal process.

A true frenzied market would compare similar to that of 2016 with over 11,400 sales occurring in a six month span with an average sales price of $1.790M. The most recent six months of data, which have been touted as the record breaking, has only achieved 6,300 sales, with an average sales price of $1.645M. So, maybe the market wasn’t as strong as the headlines would have suggested.

All that said markets do ebb and flow. The past few several years of ebb and flow has resulted in the lower highs coupled with lower lows, resulting in a downtrend. Another way to say that would be a period of frenzied strength which created a market top during 2016 -2017 then a market that weakens 2018 – 2019, a period of temporary strength 2020 ultimately resulting in another wave of weakness which results in a market finding the bottom 2021.

2020 technically was supposed to be better than 2019, however the Covid-19 pandemic really emerged as a catalyst for buying up the available detached properties. Prices in January 2020 were just below $1.6M, importantly there was less than 4000 active detached properties. The demand to move from a condo to a detached property was pushed to extremes as most employees began to work from home along with school shutdowns. Parents decided they could not go through another shutdown in a small box, they would rather have a larger building footprint and a yard during the looming second lockdown. There will inevitably come a time when all who wanted and could afford a detached home have purchased. Which will lead to a period of weakened demand.

Inventory will be a major story in 2021 one way or the other. If the inventory remains in the doldrums below 5000 active listings, even with less demand there won’t be much of an impetus for sellers to decrease prices. If however, inventory can surpass 5000 or even 6000 active listings prices will fall off with gusto. Given the 11,400 upcoming mortgage renewals it wouldn’t be impossible to see 20% of those come to market in an attempt to stem the losses. That would result in an increase of 2,200 additional inventory. Which would push the data above those key indicating levels.

Can owner occupied demand continue to lift prices to the previous peak of $1.830M in the detached market. The answer is no, since it was not solely owner occupied demand that enabled the market to achieve the all-time highs. There was clearly demand from locals along with many foreign buyers purchasing along with investors continuing to bid each other higher. Now the investors have stopped purchasing, and overseas purchasing has all but stopped. Investing will begin to occur once the proverbial blood hits the streets in the form of distressed sales and foreclosures. As the mortgage in arrears and other analytical indicators suggests that time is coming.

The value of technical analysis has become a massive benefit to investors who take advantage of the actionable intelligence produced through analytical interpretation. Let’s recall where the market has been before we get into where it is going. During the uncertain and frenzied market conditions technical analysis allowed Eitel Insights to call the top, first to do so of our analytical peers. More importantly than being first the call was correct. After breaking the growth trend in 2017 (green line) prices dropped off from 1.830 average sales price in May 2017, to 1.468Million during Feb 2019. The recent rebound was technically predicable as well.

The rationale as to why prices found a temporary bottom during 2019 is the properly place technical trend lines established during the 2008 -2009 recovery (black uptrends). As prices were down 19% from peaks, Eitel Insights did say buyers are coming off the benches due to the mitigation of the stress tests, along with home values decreasing back to 2015 levels

Prices had a prolonged test of the uptrend (lower black line) during 2019, with over 5 months of pricing data testing the staunch trend. Prices can only test a trend for so long before moving on to create a new trend, or test another previously established trendline. Current prices of 1.714Million are back up testing the downtrend which was created during the market peak and subsequent lower price points. While some analysts and the real estate boards have touted the recent increase in prices as the forever win, we see it as a typical lower highs coupled with lower lows in order to fulfill the identified market cycle.

Currently, prices are obviously testing the downtrend, coupled with the lower echelon of the upper channel. September finished with an average sales price of $1.710 Million, October ended with $1.714 Million. With just a four thousand dollar increase, we believe the near term top is likely being put in place in order for prices to return lower in order to have another attempt at breaking through that staunch uptrend line.

One of these two lines will have to relent. Given how strong that market has performed and with all the bullish chatter you would think the downtrend has already been broken and new highs are being put in place. That just simply isn’t the truth. As the market weakens, the bulls will say as the market weakens is this is normal after having such a run up, but the run up was technically perfect. Given how a triple top was put in place during 2017 – 2018, we believe the power behind the three year downtrend will be enough to break the decreasing power of the uptrend with each and every impending test. This should come as relief to home buyers but possibly induce some fear sweats for the sellers.

The entry level markets have been rising since the 2nd quarter, as we had written in February for the Michael Campbell’s Money Talks, Insiders Edge. When a large group with a similar mindset descends into a small region, prices will increase. That occurred due to the pulled forward demand to buy a detached property. With Maple Ridge and Port Coquitlam detached markets rising above 1 Million dollars the entry level of the market has been lifted. The high end market has been substantially damaged, with properties selling well below previous expectations.

Pulled forward demand simply means, purchasers who had planned to buy during the upcoming 3 – 12 months became immediate buyers due to the uncertainty of the pandemic, which resulted in most employees working from home and parents becoming teachers. The exodus from the condo market to the detached market was palpable. Inventory has increased over 2,209 since April while detached properties have only increased 484 over the same time period. This imbalance has forced prices in the short term to increase and retest the downtrend. There will come a time when everyone who wanted a house and could afford one purchased.  If the period of strength is coming to an end, what is next?

The growing need to sell is percolating. Largely due to the 11,400 properties purchased during the first six months of 2016, with an average sales price of 1.784 Million. Investors should begin to gear up, as deferred mortgage payments eventually will have to pay the piper, since they didn’t pay the bank. The 11,400 2016 purchasers are praying for continued increased sales resulting in higher sales prices. If prices do not increase and actually decline further the 11,400 number will definitely rise which forces more competition amongst sellers, ultimately pushing prices lower. 2021 will see an incredible increase for the inventory market and this will be met with little enthusiasm as the pulled forward demand has been disbursed.

Eitel Insights believes the 2017 instigated downtrend (orange line) will hold, with a possibility that a minor breakout occurs, followed by a sharp decline. In that instance, the next occurrence will be the inevitable test of the lower line of the long term uptrend (black line). This again, will be immensely important, this time more so for the bulls. Important to the bulls due to what a break of the long term uptrend will likely imply for future data. After the break of the uptrend we would anticipate similar volatile market behaviour, as was the case when the top line of the uptrend broke, which resulted in a loss of 235,000 in just four months.

The immediate and overdone stimulus actually created a temporary windfall for the economy. During the 2nd quarter, Canadian households received 56 Billion from the government while they only lost 23 Billion in lost wages and salaries due to the pandemic (Source Robert Hogue RBC) a net gain of 33 Billion. The additional income when added to the pent up demand during the shutdown and the pulled forward demand resulted in a massive late summer and fall rally for the Greater Vancouver real estate market.

The completed sales came in with another high water mark for 2020, as the oddities for this year continue. Some have exclaimed the 1353 sales as historic highs. Taking a look at the chart you can see that isn’t a true sentiment of where sales are. What is true is the historic high compared to previous October data. This pent up and pulled forward demand has resulted in very unusual activity given seasonal norms.

To recount what has transpired is the easy part. Interpreting what is on the horizon is the hard part. Eitel Insights ability to accurately predict the future based on the technical analysis has been showcased in the past, the current volatile waters will eventually calm. Once the market returns to normal rhythms, the supply demand factors upcoming during 2021 in the detached market look to favour the buyers more than the sellers. 

The governmental factor for BC has changed, while remaining the same. The past three and half years were governed by the NDP coalition with the Green party. The initial reaction to the change in leadership was to break the uptrend (green line) which had propelled Greater Vancouver detached prices higher from 1.184 Million in July 2014 to 1.830 in May 2017. After breaking the growth trend, a sharp downtrend developed (red line) which continually decreased prices until the temporary bottom was discovered in 2019.

This time not only do the NDP have a majority, they seemingly have a mandate. Having the benefit of the past three and a half years as evidence which has resulted in lower prices on average. Add in a historical point of view and which continues to indicate prices decline under an NDP government. Take the 1990’s into consideration. During the last extended NDP leadership prices declined 26% from the top to bottom. Taking the Premier of BC at his words, one could assume the upcoming 4 years will be a challenge to hold prices at current levels, let alone increase from here.

The initial period of weakness began during October 2017 and remained for 21 months. The result of that weakness was prices declined a full 19% which meant a drop of $360,000 over a 21 month time frame. The recent period of strength lasted 13 months from September 2019 at 1.5Million to current levels of 1.715Million an increase of 215,000. In this see saw trending market, the next occurrence after strength is weakness.

The future weakness will likely result from the need to sell, which will heavily impact those who purchased during 2016. The first two quarters of 2016 averaged 1.784Million, and had over 11,400 sales.  Even if, prices stay at current levels these properties will be underwater during their 5 year mortgage renewal period.

Inventory had a pull back during October, again thanks to the properly placed trend line that data has come back to retest the uptrend. With just 4,454 active listings, it wouldn’t take much of the potential 11,400 high priced sales from 2016 to list 2021 in order to change market sentiment.  

As prices hold according to the downtrend, any future price below 1.6Million would produce another test of the lower line prolonged uptrend.

The significance of the two divergent trend lines entering into the apex of a four year trend cannot be overstated. If or when prices break below the lower line of the prolonged uptrend a volatile reaction will ensue.

The previous example of the type of volatility we anticipate, came when the top line of the prolonged uptrend was broken for the last time in July 2018 (upper black line). The following months produced an attempt to regain position above the uptrend which failed, and subsequently sent the average price from $1.705 Million in November 2018 to $1.468 Million by February 2019 a loss of $237,000 in just 4 months.

Rather than being surprised each and every month with a seemingly chaotic data point, allow the technical analysis offered by Eitel Insights to guide you as to why prices move the way they do, and critical trends are being tested by the data. Without accurate trend lines, investors don’t know which time is more critical than inconsequential sideways data periods. The upcoming two quarters of data are of major significance for both the bears and the bulls of the Greater Vancouver real estate market.

Eitel Insights featured on Mornings with Simi on CKNW 980

Link to interview: https://omny.fm/shows/the-simi-sara-show/real-estate-supply-boom-underpins-strong-sales-fig

We’re seeing lots of action in real estate right now, but something that’s not getting much attention is the number of new listings. September set an all-time high for the total number of properties up for sale, and not just since last year, it’s the highest ever with over 3,200 units up for sale. 

GUEST: Dane Eitel, founder of Eitel Insights

Host: Simi Sara, Mornings with Simi

The newly active listings in September set another all-time high with over 3200 properties going up for sale. This marks the 6th straight month that newly active condos have doubled the sales totals. The oddity is the sales were loudly spoken of, but the new inventory was whispered. Prices were able to inch up despite a majority of the areas inside of the Greater Vancouver condo market off double digit percentage points, with 2 outliers being off 50%+ from their individual market peak’s.

Prices have come down from the peak by 7%. The surprising part of this data point is, when you take the current data of the 19 regions which make up Greater Vancouver, there are 12 regions down 10%+ from their individual peaks. Of those 12, 5 of them are off 40%+.  Understandably the Real Estate Boards recorded data kicks out an outlier or two to give accurate data. It is just surprising that the data indicates only a 7% drop from peak.

The data does have room to run higher before testing the possible downtrend. There could be room for some unusual price activity during the remaining portion of 2020 and into 2021. As those presale completions close. They will inevitably come to the market to be resold. Many will experience losses, some getting out by the skin of their teeth, and the fortunate will walk away with profits.

Technically speaking the downtrend indicated by the yellow line has never been tested since the inception, coupled with a second test to break above the upper echelon channel. The first attempt during March failed.

The preceding two years had clearly an up and down effect on prices. 2018 achieved peak prices with an average sales price of $751,632. 2019 prices fell more than $100,000 from the highs in 2018. Currently the 2020 prices are $50,000 higher than the low in 2019. The probably scenario is the market is creating lower highs coupled with lower lows which will see the market bottom occur during 2022.

Those presold condos could affect the data in a unique way over the short term. Presale prices do not count towards the MLS monthly average sale price data. Meaning those high valued, small square footage properties will be calculated into the average sales price for the first time. Even as the majority of sellers will lose based on their original purchase price, carrying costs, commissions, the high average sales price could bump the data higher, possibly even as high as the previous peak due to the artificially added value of high valued product newly added into the data metrics. If this does occur, this will likely be a temporary head fake. The growing need to sell has already pushed inventory to the highest levels in the past 5 years. Look at the price chart and the last time inventory was above 7000 actives, price action was very volatile, and could not propel beyond the technical price range. This is what will continue to occur over the upcoming 2021 and 2022 as inventory grows with the need to sell intensifying.

As mentioned active listings are at their highest point in the past 5 years. The seasonal norms, will likely take hold, but given that it is 2020 anything is possible. Due to the lockdowns during the spring the normal activity has been pushed back to later months. September ended with 6279 available condo listings.

The market has continued its record breaking ways again in September with over 3250 brand new listings on the market. Again seasonal norms should take hold, however over the upcoming two years the market is likely to experience 8000+ active listings, with a high probability of 9000 available units which would be an all-time high for Greater Vancouver.

The cannibalization of the market will begin after the majority of presales have completed. Once that occurs and inventory is 8000+, any unit in an older building will have very little chance of selling. The new warranties that come with the new buildings, along with the lower insurance fees, and just the overall new penny effect, will cause older units to be left with very little ammo in the chambers other than lowering their asking prices. This will ripple to the newer units, and the chase lower will have begun.

Sales did finally come through higher sales compared to the past 3 years. Which has had some perennial real estate bulls very excited. But only if you compare the data directly with past September’s. Not when you compare it to previous high water marks of any calendar year. The 1598 sales which took place in September did break out of the stagnant sales range, however when compared with previous years high water data points the sub 1600 sales is hardly anything to write home about, let alone be the headline. Add on the fact that there was the highest availability in 5 years and the newly active listings has doubled the sales for 6 months running. Eventually there will be a straw that breaks the condo’s back.

Highs sale numbers and increased prices come as a relief to many homeowners looking to exit the Greater Vancouver market during September 2020. Entry level markets have seen near term highs in prices while the higher end market has begun sell albeit at much lower than expected prices. The beginning of the school year had a major imprint to the 2020 Real Estate Vancouver market. As the colossal impact of the Covid-19th dust continues to settle, we anticipate less ferocious purchasing going forward, as the pent up demand has seemingly been relinquished with the return of the school year.

Diving into the data, the completed sales did occur in higher volume, many of which were for multi million dollars. The high end of the market was very active this month with seemingly money flowing from weak hands to strong ones. A property was listed for 13.388 Million in 2019, cancelled early in 2020 and then relisted during May at 12.998 Million the sale just was achieved at 9.85Million a cool loss of 3.538 Million dollars. Another seller who achieved a sale had been waiting for more than one year. A property that had been on the market for 533 days just sold for 4.7Million, a nice sale price however, the original ask was 6.88 Million in 2018 then 5.68Million during 2019. The eventual sale price was 2.18 Million less than the asking price during 2018. Even while these sellers were bent over the proverbial barrel the high end sales enabled the average sales price to increase to just over 1.7 Million.

Technically speaking, current prices are testing both the long term downtrend and the low end of the upper echelon in the current market cycle. A triple top indicates a market reversal. That triple top occurred over the course of 2016 -2017. That triple top began the overall downtrend orange line that has forced prices lower and ultimately to test the long term uptrend indicated by the black uptrend lines on the chart. Due to the triple top prices did break below the upper channel of the long term up trend during 2019 which sent prices to the upper end of the low echelon. Eitel Insights believes the triple top and subsequent downtrend will again test the prolonged uptrend and eventually break the trend, which will force prices to retest the low end of the market cycle.

The Real Estate Board has been reminding everyone how well sales during September 2020 are doing compared with September 2019, they conveniently leave out that compared to the overall peak (peak price 1.830 Million), prices are still down 7% along with lower sale numbers. Eitel Insights had indicated over the past year or more, any property can sell, however at continually lower levels until the market bottoms likely in 2021 for most areas across Greater Vancouver. The many examples of current homeowners having to chase the market lower will ultimately push prices to retest the prolonged uptrend.

Going forward we believe the demand will dissipate, as that rush to buy land before the school year was a major factor in the recent bump to sales data. The Covid-19 reaction had families moving from condos to a detached property which caused a spike in completed sales. The sales total which is taken from the amount of completions at land titles accumulated to 1325 which is the highest over the previous 3 years. 2020 has changed the way many people work and how youngsters are learning. If a hard second shut down was to occur parents would become teachers again. The desire for the kids to have a back yard to play in has massively increased. With parents knowing this year mattered more than past or even upcoming years we believe that is what drove the completions during September to be the high water market of the current sales cycle. As time wears on Eitel Insights does not believe this type of intense demand will keep up.

The Detached inventory has remained low during 2020 and is still lower than December 2018 data with only 4773 active properties. Contrast that with the Condo market hitting the highest new monthly listings in the past 15 years and the contrast of the two market becomes obvious. The rapid demand for a back yard from young families surely gobbled up many of the newly listed properties.

The overall inventory did not increase for the first time in the past several months, however the new monthly listings hit the highest since in over a year with 2042 newly activated detached listings. As suggested in months past the seasonal norms will likely not hold true for the remainder of 2020.

The previous yearly high water market for new active listings has always occurred before May each and every year except for 2009 and now again, here in 2020. The major difference between now and then…. No 2010 Vancouver Olympics around to corner to ensure construction and the actual economy doesn’t stop, rather than a couple governments offering meager handouts in order to be re-elected.

The effects of the Covid-19 impact is still percolating in the real economy. While yes, offering free money to everyone, whether previously employed or not, is a boon to the economy at the beginning. Longer term, this will mean more taxes. An unwelcome thought for business owners who are already struggling to keep their doors open. Secondary properties are hitting the market in droves already, as the condo inventory hits the highest point in the past 5 years.

In summary, September was a nice bump higher and ideally sellers took advantage, but ultimately, this great data point, in hindsight, will be seen as nothing more than a lower high on the way to the bottom.

Gain actionable intelligence by becoming an Eitel Insights client by visiting our website. www.EitelInsights.com

Eitel Insights first video podcast, we hope you enjoy the content.

Historic government stimulus and mortgage deferrals not to mention the eviction ban has held prices buoyant in the intermediate, these stimuli’s are all coming to an end. Eitel Insights does not believe prices will hold their current level as the months continue to progress and the economic climate nationally, and locally worsens.

Inventory is the headline of the August market update. The Greater Vancouver condo market has just risen over 6000. The first time the inventory has been that high in over 5 years. Eitel Insights has warned that need based sellers would continue to force inventory levels higher.

The new normal has people working from home and the need to live downtown has diminished. This trend is likely continue, the old draws that had young working people moving to the city’s core are as gone, as the handshake. With businesses allowing more employees to work from home, no social gathering after work at the favourite watering hole, and no exciting weekends at the night clubs. These and more factors are leaving the downtown real estate market with a glut of inventory.

The rising need to sell is best exemplified through the new monthly listings, which once again was over 2900 new listings. Which marks the first time that has occurred in over a decade. What makes this data and chart interesting is the higher highs along with the higher lows over the previous 2 years. As technicians say the trend is your friend. Higher inventory out of a need to sell, will create intense competition amongst sellers of comparable units which inevitably leads to lower sales prices.

Historic government stimulus and mortgage deferrals not to mention the eviction ban has held prices buoyant in the intermediate, these stimuli's are all comi...

Dane Eitel, founder of Eitel Insights, shares his technical and timing analysis with Michael. As well as his forecasts for the bottoms of the detached home and condo markets.

Host: Michael Campbell

Guest: Dane Eitel

Link to Eitel Insights interview

Link to the full Money Talks September 19th Program.

Dane Eitel, founder of Eitel Insights, shares his technical and timing analysis with Michael. As well as his forecasts for the bottoms of the detached home and condo markets.

Historic government stimulus and mortgage deferrals not to mention the eviction ban has held prices buoyant in the intermediate, these stimuli’s are all coming to an end. Eitel Insights does not believe prices will hold their current level as the months continue to progress and the economic climate nationally, and locally worsens.

The Greater Vancouver price chart is testing the long term conservative downtrend which was initiated during the markets peak of January 2018. Prices during peak conditions were $751,000 current prices are $692,978 indicating an 8% decline from the peak. The current test of the downtrend is the second test in the past 6 months. During March 2020 the previous test of the downtrend resulted in a $38,000 price drop the following month.

Inventory is the headline of the August market update. The Greater Vancouver condo market has just risen over 6000. The first time the inventory has been that high in over 5 years. Eitel Insights has warned that need based sellers would continue to force inventory levels higher.

The new normal has people working from home and the need to live downtown has diminished. This trend is likely continue, the old draws that had young working people moving to the city’s core are as gone, as the handshake. With businesses allowing more employees to work from home, no social gathering after work at the favourite watering hole, and no exciting weekends at the night clubs. These and more factors are leaving the downtown real estate market with a glut of inventory.

Lest we forget the upcoming onslaught of inventory that has been scheduled to complete during 2021, along with eviction bans being lifted and government stimulus to be rolled back. Eitel Insights forecasts the need to sell continuing to rise.

The rising need to sell is best exemplified through the new monthly listings, which once again was over 2900 new listings. Which marks the first time that has occurred in over a decade. What makes this data and chart interesting is the higher highs along with the higher lows over the previous 2 years. As technicians say the trend is your friend. Higher inventory out of a need to sell, will create intense competition amongst sellers of comparable units which inevitably leads to lower sales prices.  

August sales of 1336 were lower than what occurred during July. The sales have remained inside of the Identified market cycle since 2017. With the August data concluded thus ends the seasonal hot market. Historically, April to August are the 5 hottest months of the year. During 2020 the sales over the 5 months averaged just 984. Some analysts and the Greater Vancouver Real Estate Board have touted 2020 as a great year simply because it was better than 2019. What a great year looked like was 2016 with the 5 months of hot selling season averaging over 1850 sales per month.

There was good reason for why sales did rise during the past two months. With the second wave of the Corona Virus long talked about, there was a rush for those who had a need to buy to do so, before a potential second shut down occurred. Another reason for the rush, is the extremely low interest rate environment. Now that the US Federal Reserve has stated there will not be any rise to the interest rates until inflation rises well above 2% for a sustained period of time. There earliest projection for accomplishing the 2% breakeven is 2023.

Eitel Insights does not see any reason to rush into the Greater Vancouver condo market especially as a strict investment. Location matters, but timing is everything. There are 20 markets which make up the Greater Vancouver data, and each area has its own velocity inside of their market cycles. Become and Eitel Insights client to find out which market trends are dominant in your neighbourhood.

History has a tendency to repeat itself, one of these cyclical factors is mortgages in arrears. Mortgage in arrears is defined as, a property that is 3 months or more behind on the mortgage payments. Current levels of delinquent mortgages are less than 1000 properties across BC.  Which is the third lowest cycle of data going back 4 decades. The good news ends there.

While rising mortgages in arrears does not make the market go lower in and of itself. Rising numbers or delinquent mortgages is a symptom of the BC real estate market deteriorating.

Historically, after a market cycle initial low has been established, inevitably the next phase of the cycle will be to break the established downtrend, consolidate the base and then the creation of an uptrend which will ultimately test the previous highs and attempt to move beyond old data creating a new high on the chart.

The current data has broken the downtrend which had become dominant after the mortgages in arrears peaked in February 2011 with just under 3,000. Once the peak occurred the aforementioned staunch downtrend drove down delinquent mortgages from over 2,900 in 2013, to below 1000. The downtrend was subsequently broken in the 3rd quarter of 2018. Q3 of 2018 also was the initial low in the establishment of the base. After breaking the 5 year downtrend the base began to form around 900 with multiple tests attempting to go below but to no avail. Give the current data as of March 2020 indicates over 980 properties in arrears. Eitel Insights, is stating, the base has been put in place.

Again, most technicians will tell you after the base comes the rise. The process of discovering the low end of the cycle has occurred, and the market is likely nearing the end of the consolidation phase. The data shows an upper echelon double test occurring attempting to break above the 900- 980 current range.

Not so coincidentally the current cycle low (900 – 980) is higher than the previous cycle, which occurred between 2006 -2008. The range at that time was between 715- 805 delinquent mortgages. The 2006 -2008 cycle was higher again than the previous cycle low during 1990 – 1995. When the range was 200 – 500. Which will lead to the future cycle low likely to finalize higher than our current low range likely around 1100 – 1250 mortgages in arrears around 2029.

2029 is a long time away, so let’s stay with what the BC short term forecast is for now. Now that the base of the cycle low has been put in and the upper echelon of the cycle low is being tested, a breakthrough above 1,000 delinquent mortgages is upcoming. While little in life is certain, based on the chart I would be willing to say that the forthcoming data will look very similar to the last two uptrends. The upcoming climb will make many homeowners themselves, feel like Sisyphus.

The rise to over 3000 delinquent mortgages will likely occur by 2023. Many of these upcoming delinquent mortgage will inevitably be from purchases made during 2016 and 2017 while prices were peaking. As property values continue to fall for the largest market in BC. Greater Vancouver prices have fallen from peaking at 1.830 Million during 2017 to just over 1.6 Million in July 2020. That loss of $230,000 tied in with the economic troubles, add it all up and the result will likely show in an all-time highs for delinquent mortgages transpiring in the not too distant future.

While 3000 properties in arrears may not sound like that high of a number, and it isn’t. The significance is, a major portion of these properties will be forced to come onto the market. With business shutting down and active participation in the work force way down, the possibility of the homeowner working their way out of the financial problem is unlikely. The additional weight of distressed properties hitting the market will force current sellers to become more aggressive as the buyers’ mentality shifts from bargain hunting at current prices and a fear of overpaying for a depreciating asset becomes more prominent.

Given the fact that history repeats, now that you are aware of a strong likihood of distressed property numbers rising, a need to sell that is growing stronger by the month with the bills piling up and the CERB running out. Eitel Insights advises potential real estate investors to bide your time. Yes, location matters…. but timing is everything.

Eitel Insights offers real estate market forecasts in every major area across BC, and all major areas right across Canada. To become a client visit our website and gain access to our analytical interpretation offering actionable intelligence to our clients.

As the eye of the storm is eerily calm, so too is the Greater Vancouver Detached Real Estate market. Largely thanks to historic government stimulus. Just a heads up, the stimulus, draws nigh. CERB is coming to its conclusion, the deferred mortgage program is ending, and evictions have returned, now let’s see where the market will head on its own volition. Hint, down she goes.

The average price for the detached market in Greater Vancouver was 1.638 Million. Technically speaking this is the 20th data point since 2016 that has been around the middle threshold of 1.580M – 1.640M. What that signals to Eitel Insights, is this middle threshold is worn out. With over 30% of the data out of the last 58 data points resulting inside of that narrow 60 Thousand dollar band. Our interpretation of these multiple clusters is that prices have exhausted the middle threshold. The next challenge to the Greater Vancouver market will be to find the market bottom (likely at 1.40 Million during 2021), then consolidate that base price. Once that market has accomplished these herculean feats, prices will begin to rise. After the base, Greater Vancouver market will begin to climb, the middle threshold will be broken like water going through a tissue. As there have been multiple test of the threshold on the way down there will not be much need for sustained price tests on the way back up to the peak echelon.

Inventory has continued to grow, and August resulted in 5000 active listings. The highest level in the past 10 months however was still staunchly lower than the 15 year average of 6000 actives. At the current levels the inventory has 2000 less properties than 2018, but the average sales price is only 13 thousand dollars higher. That implies not too many are choosing to be selling their property during this time. The properties that are on the market are more than likely “need based sellers”, which as Eitel Insights has forecasted will continue to rise. One example of why there are less sellers than two years ago. The market was still considered by other analysts to be a hot market, listings were high as Realtors told sellers they could name their price and a buyer would pay it. That possibility never actually transpired, what did occur was a cancellation many listings, based on the Realtors advice that next year will be better, wrong again. Here is one example property out of many examples had listed for a pie in the sky price during previous years. A property listed in 2018 with a 1.658 Million list price, never sold, relisted in 2020 at 1.378 Million and sold for 1.285 Million. Want another example? Here you go, 2017 list price of 5.288 Million, 2019 list price 4.788, price reduction down to 4.388 Million, another reduction to 4.25 Million. 2020 list price 4.099 Million, sold for 3.80Million.

Would either of those properties have continued to chase the market lower unless there was some kind of a need to sell? I doubt it. This need to sell will continue to permeate throughout the detached market.

Sales ticked lower in August with 1108 sales, compared to July which had 1134. With the sales escaping the identified channel the past two months, we anticipate the data to return lower as the economy will be on its own, without the aid of any government buoys. The government did everything to halt the economic impact of Covid-19 across Canada, especially in the two largest real estate markets (Toronto & Vancouver) now that the government’s intervention in to the free market is coming to the end. The forthcoming data will continue to under deliver in upcoming quarters, now that folks have to go back to spending money they earn rather than spending the handouts.

After the anemic sales during April and May, the sale surge during July and August, should not come as a huge surprise. Taking all of the past 5 months of sales into consideration, April 393, May 544, June 873, July 1134 and August with 1108, the average is 810, when compared to the previous 2 years the average is good. However as you will remember, Eitel Insights has stated this market has been falling off since peaking in 2017. The 5 year average of sales during the 5 month span is 1163 sales indicating the 810 to be less than stellar.

Yes, we are aware that interest rates are low, but now that the governments have moved off of the standard 2% inflation target, I do not see any real panic to lock in the rate before they soar higher, do you? If you don’t, we suggest to practice patience and look to accomplish a sale at a lower price point with more selection during 2021.

Eitel Insights has offered 2021 as a target to purchase since 2017, unlike all other analysts who have flipped flopped over themselves in the past few years, we remain staunch due to our ability to block out the noise and stick to the analytical interpretation. These ever changing fundamentals that most pontificators speak on are on data that transpired a quarter ago at least, this data is tainted with the CERB and other unusual stimulus. Those fundamental negative results will not be seen until 2021, then they will say the sky is falling after it already fell.

Real estate need not be, buy, and close your eyes. With Eitel Insights we open your eyes to the possibility of tackling the largest purchase of a life time with unemotional analytical interpretation, along with a history of accurately forecasting various markets across Canada.

To become an Eitel Insights client and be able to accrue actionable intelligence through our analytical interpretation, visit www.eitelinsights.com