Was that it? ‘The Top’? [Possibly] – “They are not as excited, they’re taking a wait and see approach. They’ll put an offer in, and the offer may not be close to the asking price, and then the owner might give them a counter offer, and then the buyer is gone.”

So, was that ‘The Top’? Perhaps it was.

TECHNICAL ANALYSIS:
The average price of a detached home in Greater Vancouver has dropped $115K from a top of $1.22M in May-June 2011. That’s a drop of 10%.
From a technical perspective, however, the price is still in a steep uptrend (light red line), which will be violated if prices drop below about $1.10M next month. Below that there is support (light blue lines) at $1.0M, $935K, and at (as long-time readers know, a level we see as crucial) about $740K.
Price drops will not be in a straight line, and we would not be surprised to see short-lived bounces upwards off any of the support levels. That is perhaps most likely to occur at the $740K support level, before that support then gives way to the downside perhaps 6-18 months later.
We expect a number of factors to add momentum when prices start to fall in earnest. Each violated level of support will bring more sellers to market.

[Chart from the REBGV. For caveats regarding use of technical analysis and average prices, and for prior TA at VREAA, see 11 Sep 2010]

INVENTORY INCREASING; SALES STAGNANT; MOI RISING
“September was a month that recorded the third lowest number of sales in the last 10 years and in combination it had the third highest volume of listings in 17 years.”Larry Yatkowsky, Realtor, 4 Oct 2011
Months of Inventory for Greater Vancouver roughly 6.6
Over 800 SFHs for sale on the westside.
Prices in October appear, thus far, to be flat compared with September.

NEW BUILD SFH SALES ON WESTSIDE: ZERO
In September, there were 0 (zero) new build SFH sales on the west-side. This is the first time that this has happened in any month over the 17 years of available records. The HST ‘uncertainty’ was immediately blamed.

FOREIGN BUYERS ‘LEVEL OFF’
[Wouldn't that more accurately be 'DROP OFF'? -ed.]
Reporter: “Realtor Lorne Goldman says that he’s recently seen a 30% decrease in sales on Vancouver’s westside. Off-shore buyers from mainland China appear to be leveling off”.
Goldman: “You’re not seeing as many, and the ones that are coming in, are, you know, not as excited, they’re taking a wait and see approach, … they’ll put an offer in, and the offer may not be close to the asking price, and then the owner might give them a counter offer, and then the buyer is gone.”‘Buyer’s Market’, Global TV, 4 Oct 2011
[With the drop in average prices, and with simultaneous loonie weakness (down 10% in 6 weeks), these homes would actually look 15%-20% cheaper to foreign buyers. So, why hasn't demand increased, as bulls always claimed it would? Why aren't buyers stepping in to snap up bargains and 'deals'?
It is way too early to tell, but regular readers know that, unlike the bulls, we fully expect demand to drop with falling prices, as demand based on the premise of rising prices will disappear. Buying based on price-momentum will stop. - vreaa
]

‘BUYERS’ MARKET’: A MISNOMER [so far]
“Prices are still high, but listings have increased and sales have decreased, turning the Greater Vancouver area into a buyers’ market!”‘Buyers’ Market’, Global TV, 4 Oct 2011

Chart shows impressive year over year price changes.
[We have a semantic problem: A 'buyers market' should not simply be defined in terms of sales:listings ratios. That term leads to confusion: If sales are slow and inventory rises, but prices are still 2-3 times fundamental values, describing that as a 'buyer's market' is just a sales gimmick. Sure, sellers start sweating, but buyers are not yet being offered good value. A true 'buyers market' only emerges when prices fall to a range of good value, as determined by underlying fundamentals, or lower. Of course, higher MOIs do translate into downward pressure on prices, eventually. We are possibly starting that process now in Vancouver-ed.]

SALES COMPOSITION CHANGING?
“What’s selling? A bottom end market with only 25% of the Downtown Vancouver [condo] sales over $500,000 and a mere 8% over $1M. August listings and and sales were flat, compared to July. Inventory climbed to 7.2 months. Up from 3.7 in March.”Maggie Chandler, realtor, ‘Downtown RE Update’, 3 Oct 2011
[This effect may exaggerate 'average' price drops, so caution needs to be used in interpreting average prices, as always. - ed.]

EVEN MORE CONVOLUTED BULLISH REALTOR ARGUMENTS
“We saw a sizeable number of investor class immigrants who came here a little more than 5 years ago, got their contribution, or their investment to Canada back… and many of them are using that money to…uh.. putting that into the real estate market.”Cameron Muir, BCREA Economist, Global TV, 4 Oct 2011 (1:30 on)

SENTIMENT CHANGING?
“We are here on the front line in Vancouver. It’s amazing the attitude shift in people within the last 2 months or so. People are openly talking about the market here being in a bubble. People I know who were total RE pumpers are starting to look scared. This is going to be epic.”Drew at greaterfool.ca 4 Oct 2011 11:54pm
“I was sitting and doing my work minding my own business and started hearing my coworkers discuss real estate, and they were literally mad about what’s going on. Amazing, the tides really are turning.”4SlicesofCheese at vancouvercondo.info October 5th, 2011 at 1:06 pm

FLAHERTY STILL IN DENIAL (publicly, anyway)
Asked at a news conference in New York (5 Oct 2011) what it would take for Canada to act again to cool the market, Finance Minister Jim Flaherty said: “It will take clear evidence of a bubble in the housing market in Canada, which we have not seen.”Reuters, 5 Oct 2011

So, a top, yeah, perhaps.

9 responses to “Was that it? ‘The Top’? [Possibly] – “They are not as excited, they’re taking a wait and see approach. They’ll put an offer in, and the offer may not be close to the asking price, and then the owner might give them a counter offer, and then the buyer is gone.”

  1. Top? Maybe. I prefer the term “permanently high plateau”.

    On a completely unrelated note, here’s an interesting article from Tyee Bridge:

    ‘Going Going Gone’
    The exorbitant cost of housing, lack of decent jobs, and changing nature of the economy have squeezed the middle class out. That’s why a generation of ambitious young people is leaving Vancouver
    http://www.vanmag.com/News_and_Features/Gone?page=0%2C0

  2. 6.6 months of inventory is pretty significant. Here in Toronto we have been hovering around 2.2-2.4 (plus or minus) for the last year.

  3. Joe Q.
    City of Vancouver detached months of inventory is 2.7 but
    suburbs and condos not doing particularly well.

  4. 4SlicesofCheese

    “FLAHERTY STILL IN DENIAL (publicly, anyway)
    Asked at a news conference in New York (5 Oct 2011) what it would take for Canada to act again to cool the market, Finance Minister Jim Flaherty said: “It will take clear evidence of a bubble in the housing market in Canada, which we have not seen.” – Reuters, 5 Oct 2011″

    Not the first time Flaherty is in denial,

    • Well, lots of people in the ‘blogosphere’ saw all this coming, and, thanks to the wonders of technology, this is all still on record.
      Lots of us had read about the consequences of the US housing bubble and the mountains debt.
      Just as one example, a guy called Doug Noland had been writing a weekly column called ‘Credit Bubble Bulletin’, at ‘Prudent Bear’ since at least 2001. Many had see the risk, and predicted dire consequences, but, we suppose these folks are outside Flaherty’s universe.

  5. I’m wondering about the MOI calculation

    16085 listings against 2,246 sales is 7.16 months of inventory. (Either inventory is a sign of a slowdown…)

  6. Oh one thing that I noticed was the large number of detached/duplex permits issued in the City of Vancouver in July and August. That build-out will complete sometime in 2012. Note this is roughly in-line with the Statscan construction employment surge in Vancouver in September. I don’t have data for the rest of the region but Richmond has a fair number of properties on the go. It’s becoming clear who the buyers have been in quarters past and it’s not the narrative many would like to hear.

  7. This comment on the market from local realtor Rob Zwick, in an e-mail to clients ‘Oct 2011′ [excerpt care of 'Al', by e-mail to VREAA, thanks Al] –
    “I have been eagerly awaiting this month’s statistics to see what sort of bounce back, if any, we would see after the slower Summer season. The answer, somewhat surprisingly, is that the we didn’t seen any bounce back in sales activity at all – in any of the neighbourhoods we look at. The degree of sales drop varies quite a bit, with more than 30% drops in sales activity in the Downtown, Vancouver Westside attached and detached, and North Vancouver attached markets compared to just 6.7% in the Vancouver East attached market and 16.6% in the Vancouver East detached market. Interestingly enough, this decreased sales activity has not really impacted sales prices as both the average and median prices in most markets held relatively stable. We have also not seen a dramatic spike in listing inventories. Should listing inventory start to rise in October, we may be looking at some minor slips on the pricing side.”

    This reflects what Lorne Goldman said above.

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