“Shadow Inventory is the inventory where owners have removed their listing awaiting the market to improve. Add this to the actual listings and there are another 25% of listings available for Van-West.”

“Shadow Inventory is the inventory where the owners have removed their listing awaiting the market to improve. Some interesting stats can be seen by this and we can see that in this slow market, the shadow inventory is large.
One area where I have the stats for is for Van-West detached. I took the listings at September 1, 2011 and compared to what has occurred since then. Some interesting stats have emerged.
There were 648 properties listed for sale on September 1. Of these, only 238 sold or only 36%.
Of the remaining 410 properties, 185 are now listed for sale and 225 are not. This means there are at least 225 of failed sales attempts which now sit in the Shadows.
Add this to the actual listings and there are another 25% of listings available for Van-West. I will try to find some more data but this is a pretty large amount of unlisted shadow inventory properties. As well, it will likely only get worse as we continue to see slow sales.
However – one big stat is that only 36% of properties for sale as of Sep 1 actually sold.”


“Of the 850 or so properties for sale in Van-West detached, there are 193 “flippers” or those which purchased their property in the past 2 years. I would say a 2-year hold is a flip. These are the ones most likely to push this market down when it gets soft.”

zrh2yvr at vancouvercondo.info 6 Apr 2012 7:14am and 7:25am

Good analysis.
How will these ‘sellers-in-the-wings’ respond when prices start to declare a definite downward path?
– vreaa

39 responses to ““Shadow Inventory is the inventory where owners have removed their listing awaiting the market to improve. Add this to the actual listings and there are another 25% of listings available for Van-West.”

  1. “Who knows what evil lurks in the hearts of men?… The Shadow knows.”

    Why worry? According to Bob Rennie… flipping properties is just like trading baseball cards. Funny thing about baseball cards, you get a great big stick of gum in every pack… What kind of gum?

  2. 4SlicesofCheese

    MY wife and I had lunch with her old classmate that was visiting from HK.

    She was staying at her aunts place near Granville and 47th ave.
    They had previously lived in Richmond but moved, because they thought West Van had better schools, for 1.3 million(not sure when) and now her aunt told her it was worth 4 million (that amount is probably too optimistic)

    Her aunt was the the only family she had left in Vancouver, the others had all returned to HK after the kids finished school. And they plan to cash in and move back once the kids are done school as well.

  3. This isn’t the conventional “shadow inventory” that the US has, the term is, when I’ve seen it used, usually reserved for REOs and other properties in unrecoverable default that haven’t been disposed of yet and must (not may) be listed on the market. That is not what we’re talking about here, which is the result of several years of owners trying, but failing to, sell. ZRH is opining that a large percentage of properties once listed for sale in the past few years have never sold and, one assumes, the owner desires to sell but is holding back for various reasons. If conditions change and owners cannot carry the property (i.e. lenders balking or some cash flow crisis) or develop a larger impetus to sell, they will list for sale in greater numbers than before.

    Perhaps this “shadow inventory” as defined by ZRH is happening, but it is likely no different from the US before the onset of the traditional “shadows”, and it does not necessarily mean that the REOs and other such distressd properties will emerge with the same frequency as in the US.

    I do know the cases of several “shadow” properties in Vancouver. Many are not on the market but if someone got their number and offered them their price, it would be sold in a heartbeat. Assets are nice, cash is, sometimes, nicer ’cause it buys sh!t.

    • We can get by the semantic issues by considering various sub-types of potential sellers.
      In this case, zrh is describing a sub-type of seller who would like to sell now, but only at a price that they deem good enough.

      • I agree, just want to ensure the two definitions aren’t confused. The US still has a massive shadow inventory problem because it massively overbuilt. It’s unclear to me the same conditions have manifested themselves in Vancouver.

    • every house has a price

      (not sure how to embed this … http://www.youtube.com/watch?v=ehdAEyAGBEc)

    • Tend to agree Jesse. Some of these are surely people just fishing for suckers and that nice fat payday. They are not taking it very seriously though. There is no sense of desperation as homes get delisted because few people yet recognize the coming risk. I am betting they will be in less of a hurry to take down that listing once reality sets in that prices can fall quite dramatically once a corrective pattern is established. Maybe that is part of the reason why high end properties usually end up falling the hardest. There is a kind of bravado amongst their owners and a sense of invincibility that might cloud their judgement.

    • I’ve seen “shadow inventory” used to describe houses pulled from the market in the U.S., essentially the wannabe sellers holding out.

      I’d definitely also count the empty stuff the foreigners are holding. Probably consider that as the first to jump onto the market in a downturn. The wannabe sellers of primary residences can be stupidly hesitant about re/listing and taking a smaller loss now.

      I’d also include in the analysis, but probably not under the “shadow” term, the mortgage holders who can’t handle a 2% increase in interest rates whether they’ve ever listed or not. “Potential distressed future inventory” perhaps.

  4. “4SlicesofCheese” sorry but 47th and Granville is the westside or Vancouver West not West Van. And houses in that area are around 4 million(for something decent) Anyways that trend has happened before, except that the families usually stayed here and contributed to the economy somewhat instead of having an empty house.

    • These pretzels are making me thirsty

      The only problem is that no house in Vancouver is worth that much money….except of course to people who have made it by devious means and are fleeing from their own countries. The Canadian immigration system makes it easier.
      Not something to gloat about or indulge in jingoism……I am surprised at both the naivety and the misplaced snobbery of most people in this country

    • 4SlicesofCheese

      yeah sorry meant vancouver west.

  5. Agreed….. I wouldn’t describe those houses as “shadow inventory”….more like “pent-up supply”…..

    😉

  6. The shadow inventory is still coming online down south as prices continue to sag overall. Check out this article on houses that cost the same as a car: http://realestate.yahoo.com/promo/homes-for-the-price-of-a-car.html

    Would any of these be less than half a millie in Vancouver?

  7. Past Ed… One stuck in Moderation Hell… Prior thread. Thank you!

    • Not bad Nem. Just one in moderation? My rate is improving too. I only get sent for review once in 9 or 10 posts now. Maybe that WordPress system is finally getting used to me!

  8. LS in Arbutus

    There were 648 properties listed for sale on September 1. Of these, only 238 sold or only 36%. Of the remaining 410 properties, 185 are now listed for sale and 225 are not.

    ——————————-

    Wow! That’s a lot of unsold homes and…. not especially surprised. I bet if you split those numbers between homes over $2.5 million and homes under $2.5 million, you’d find that a much larger percentage of the homes under $2.5 million sold than those over $2.5 million.

    • I was thinking the same but had not yet checked. Here’s the split.

      Under 2.5million
      Listed 269
      Sold 136 Approx 50%
      Unsold 133
      Of which
      83 are not listed
      50 are re-listed

      Under 1.8M
      Listed 123
      Sold 70 (56%)

      Over 3M
      Listed 286
      Sold 66 (23%)

      So – There is a definite split.

      One last split
      New Houses (Those showing age of 0 or 1)
      66 Listed
      20 sold (30%)

      At what point do the builders (if these are builders) have to really try to move these and at what price? How long would there have to be a drought of buyers before they just have to take the loss?

      • LS in Arbutus

        This is actually worse than I thought for the houses under $2.5 million. I thought the majority were selling. The new houses percentage at nly 30% SOLD is amazing… is terrible!

        I think people are removing their listings because in Vancouver, it often seems the market can move from so-so to white-hot over a period of a few months…. so…. maybe they think if they wait they will get more.

        The bottom line is whether they need to sell or not, a lot of homes aren’t moving. And those that are new builds or over $3 million are barely selling…. this is quite telling and it is what I am seeing in my neighbourhood.

      • It’s doomed LS. The bubble has popped. Just watch the stats roll in over the next few months. Those damn fools will regret selling like they never regret anything in their lives. They missed the boat altogether and it is one ship that will never return.

  9. doesn’t this “shadow inventory” tell you anything about the kind of owner we have on the west side? Heck, if they needed to sell wouldn’t they just continue to discount until sold? What does it tell you that the seller would rather take it off the market than drop the price?
    There is a lot that can be learned abut the Vancouver detached market by way of this practice

    • Why would you sell when prices are still rising? It would be the funniest thing — ever — if the only reason to sell a house is to buy (wait for it) another house.

      Screw the commish, pass the lube.

    • There is merit to this, perhaps the focus shouldn’t be put on the West Side. How do these “pent up supply” numbers stack up for other municipalities, particularly Van East where buyers may be more attached to the local economy?

      Things certainly cannot be very dire if buyers can afford to delist. Its only when forced sales begin to appear en mass will be begin to see discounts. This delisting trend is not exactly a bearish indicator, more representative of sellers testing the waters, likely for a ridiculous offer.

    • Yes. What it teaches us, Formula, is that vendors are “detached” from reality and few understand what is actually coming down the road. We are on course for a house deflation that will make the eighties look like a happy little holiday event.

      Yet after all the media attention, after all the dire warnings from the banks and Ministers and Federal agencies, and despite the factual experience of the Irish, Americans, Australians, Chinese, Spanish, Greeks, Brits and you name the rest if you please…..

      These damn fools keep thinking they can play this game out for one or two more innings. The greed is off the bloody charts. They think it is a game show perhaps where you can lose but still spin again. They fail to appreciate that this is real money at stake. Real wealth at risk.

      Incredibly, this pack of idiots who have (in economic terms and price growth), reached a pinnacle achieved by only the very rarest few souls in the world, are now squandering the biggest economic advantage handed to any sorry class of people the whole world over….

      And they are WASTING the advantage. Un-Bee-Leave-Able!!!

      Despite living in what is ostensibly the second costliest city on the planet relative to incomes, they still want to fish for better deals before cashing out. They delist like spoiled children hoping for better terms. Now I really want to swear (I won’t) but these people are the most delusional pack of idiots that has ever graced the face of this forgiving Earth.

      And they are true fools.

      Happy Easter.

      • “The most delusional pack of idiots.” Remember…”investors” were continuing to buy Nortel shares when each one of those shares cost $120.

      • comparing Vancouver real estate to high tech stocks?
        Quirky comparison when you consider that the world wide real estate boom started when investors looked for more solid (real) investments directly following the high tech market crash early 2000s.
        No, Vancouver real estate is not the new Nortel.

  10. Slightly OT — well, actually, not OT at all — : Peter Ladner will be talking about the Vancouver housing situation tomorrow (Monday) morning, April 9, on CKNW radio. Sorry I don’t have more details, but wanted to alert any interested readers.

    • Thanks Vesta! If there is any time to get some action, for better or for worse, it’s the lead-up to an election.

      I don’t know if you caught the UK budget but the government announced an increase in stamp duties on higher-priced properties. I’ll take bets now: what are the odds that taxing the sh!t out of land values won’t be discussed?

    • Put up a link if you can get one, Vesta. I would like to hear it.

    • PS: what does OT mean?

  11. Sorry, forgot to mention that Ladner will be speaking at 9:30 a.m. (on CKNW radio, Mon. April 9)!

    Farmer, I do hope the programme can be linked to the VREAA site, in case you and others would like to have a listen.

    OT = Off-topic

    Jesse, I’d love to see higher taxes on higher-priced properties here. Let’s hope Vancouver follows the mother country (England) on this one!

    • Thanks Vest. I kept thinking OT meant “Over-Time” but it never made any damn sense in context. Anyway, I will try to find the station. I don’t get it here but it must be streamed online so it will be filed as a downloadable link I hope.

    • “higher taxes on higher-priced properties”

      They already sort of did this with excepting higher-priced properties in the Vancouver/Capital regions from HST transition breaks.

      Already there is a massive “land lift” tax in Vancouver for rezonings, which is significant if applied fairly and transparently, unfortunately low-density properties have already partially priced in rezonings into the land prices.

      There is the PTT and normal Realtor transaction fees, which are no small amount in normal times when prices aren’t rising at 7% per year. Already condos are trading negative year-on-year based solely on these taxes.

      Then there are city taxes and service fees.

      So it’s not like it’s laissez-faire out there right now. But IMO might as well tax environmental harms, and arguably land hoarding and speculation is a form of environmental damage.

  12. How’s this ‘good analysis’? Shadow inventory is declared to be ‘high’ with absolutely no point of reference. Maybe it’s low by historical standards? Also, picking a single month of the year almost certainly introduces bias.

    • It is good analysis because it adds some substance to a concept that we have previously talked about and thought about but haven’t been able to vaguely quantify.
      zrh shows that there are at least 225 Van-West detached homes that were on the market in Sept 2011, didn’t sell, and were taken off the market. That’s the equivalent of 25% of current inventory.
      Sure, it’d be better to have YOY comparisons.
      Regardless, it’s of interest that the figure is 25%. It’s not 1%, or 5%, or 100%.. it’s 25%. It gives us an estimate of one seller-type that may be waiting in the wings in this property group. That’s good analysis.

      • this analysis is only useful by comparing data to other markets. This might be a common occurance in most centres. Perhaps, as another poster suggested, a comparison to east Vancouver “shadow” inventory may provide some contrast.

      • Well, I wouldn’t go so far as saying it’s “only” useful if compared with other markets… it tells us something about Van West regardless.
        But, yes, the same figures for East Van, or West Van, or other areas, would be interesting.
        Anybody have the data that would allow for that analysis?

      • 25% is meaningless without something to compare against, especially when the original assertion (completely unproven, btw) was that this proportion is somehow ‘large’.

        It’s good that somebody has bothered to quantify something often mentioned only in passing, but the analysis is shoddy.

  13. If you look at the real estate stats published by the Van Real Estate Board, West Side, detached, Apr 11 to Mar 12, about 15% of listings “disappear” out of the stats. ( if you take the total listings for one month and deduct sales). It’s a fairly crude measure but indicative. The “disappearances” have been over 20% since Oct 2011.

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