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.

Topic: Vancouver’s real estate market remains hotter than ever.

For more insight we talk to Dane Eitel, Founder and Lead Analyst at Eitel Insights

Host: Lynda Steele, the Lynda Steele Show

Link to Interview: https://omny.fm/shows/steele-drex/the-incessantly-hot-real-estate-market-in-vancouve

Vancouver's real estate market remains hotter than ever. For more insight we talk to Dane Eitel, Founder and Lead Analyst at Eitel Insights

“Owners looking to downsize have an amazing opportunity right now,” said Dane Eitel, lead analyst at Eitel Insights, which tracks the residential market. “This is the first instance in four years where the price of an average detached house has reached over two and a half times the value of the average condo.

“For an example, a [mortgage-free] owner of a Vancouver East house could sell their property for on average for $1.82 Million. The average one-bedroom condo in the West End is selling for $533,694. That implies the sale of a single detached house would enable you to buy three one-bedroom condos in the West End,” he explained.

Eitel estimates that the average price of a West End condo is now down 21 per cent from peak price in the neighbourhood, set in June 2018.

Written by: WI Staff, Western Investor

Link to full article: https://www.westerninvestor.com/news/british-columbia/early-february-numbers-show-condo-buyers-back-1.24282890

— One-bedroom condo on Pacific Avenue, West End, recently listed at $523,000. REW.ca/Oakwyn Realty

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. 

2020, the year of Covid-19 resulted in some eye popping data. Historical anomalies were common place. Real estate seasonality was replaced with varying degrees of lockdowns. 

Greater Vancouver property values were on divergent tracks through 2020. Detached property values are just 3% below their historical high ($1.830 May 2017). Conversely, Condo values are just 3% above their cycle lows ($643,471 June 2019). Main proponent to the contrasting trends… Inventory. 

Price volatility was apparent in both markets. The Greater Vancouver average home sold for $1.710 million in February, values dropped to $1.586 million in May and finished the year at $1.770 million. The December sales price implies the market has gained 11% from the May 2020 low. All in all home values have reclaimed much of their losses from the preceding two years and now sit just 3% below the historical market high of $1.830 million. 

The condo market average sales price had multiple swings as well. Condo’s were selling for $699,099 during March, values dropped to $661,739 during April. Values temporarily recovered from the losses and were able to achieve a $698,996 sales price during September. Ultimately the values dove lower and created the low of the year during November with prices down to $657,030. Values finished the year with an 12% loss compared to the historical high of $751,632 during January 2018.

Much was made about sale totals during 2020, the data was greatly effected by the spring market being pushed into summer and summer into fall. If demand was a driving force behind the price changes for 2020 you would expect the condo market to be out performing the detached market. 

The condo market yearly sales totals were only down 6% from their preceding 15 years of data. Conversely the detached yearly sales were down 15% over the same time period. 

The condo asset class was able to achieve 14,003 sales in 2020 down just 3% the 2005 - 2019 average of 14,471. Being able to achieve an average monthly sales total of 1,205 was impressive considering April was only able to achieve 508 condo sales. 

As stated the detached yearly sales totals fell over 15% from the historical average. 2005 - 2019 yearly average sales total was 12,748. 2020 was only able accomplish 10,832. That breaks down to roughly 160 less properties sold each month during 2020. 

So why did detached values go higher while condo values dropped? The sales totals implied demand was closer to historical norms in the condo asset class while the detached sales were off by a wide margin. 

The answer is simply available supply levels. 

The 2020 detached housing market experienced the lowest total yearly active listings (50,225)  the lowest monthly peak of available properties (4,823 September) and the lowest monthly low (2,762 December)All historical anomalies compared to the preceding 15 years of data. 

The historical lack of supply drove home values higher across Greater Vancouver. Inventory during April of both market was a low point given historical norms, due to the initial wave of lockdowns. From April until September the detached market inventory increased by a disappointing  20%. The condo market inventory increased by a dramatic 58% over the same period of time. 

The condo data on the other hand experienced the high level total yearly active listings (58,543), monthly peak (6,279 September), and higher low (4,124 December) All data points are higher than the preceding 5 years.

The massive divergence between the two inventory levels impacted how the supply demand metrics exemplified themselves throughout 2020. The historical low amount of detached inventory during 2020 of 50,225, created the illusion that 10,832 sales were herculean as opposed to the insignificant total it truly was. 

By achieving near average inventory levels of 58,542 active inventory the condo market supply was able to engulf the sales totals which were only down 3% from their 15 year historical average.

Should the Detached inventory return to historical norms during 2021, home values will likely decrease as the supply demand metrics begin to even out. However, if the detached inventory remains at abysmally low levels, the recent price increase could be sustained. The initial 6 months of 2021 will greatly impact serval years forward.

Inventory typically increase as home values rise. Owners prefer selling at market highs rather than lower price points. Throughout 2018 - 2019 when prices declined had declined as low as 20%. The current high home sale prices and low inventory has created an excellent opportunities for owners to sell at market highs with little to zero competition.

Again in contrast with the detached market, the condo market has many ripe opportunities for purchase. Downtown Vancouver have realized substantial losses. All four areas (Downtown, Coal Harbour, West End, Yaletown) which make up the Downtown core have all been down at least 25% from historical highs during 2020. These losses have created an ideal entry point especially for those looking to downsize from their detached home.

The desire for detached properties combined with low inventory levels have pushed home values up across Canada. The city of Toronto home values in December were $1,475,758 up 18% from the lows of the year (April $1,249,730). With the recent increase, the city of Toronto detached property values are just 6.5% below the historical highs of $1,541,003 achieved in April 2017. 

The exodus from condo’s for detached properties effected the city of Toronto greatly as well. Condo values achieved their historical highs during February 2020 of $722,675. Values rapidly dropped to finish the year down 13% from those highs and just 2% market cycle lows. 

For you individual market charts and analysis please contact Eitel Insights directly.