“The number of residential property sales has hit a 10-year low in Metro Vancouver leading the Real Estate Board of Greater Vancouver to declare a buyer’s market.
The announcement is significant since the board has in recent months been calling the market “balanced.”
According to the board’s June report, sales of houses and apartments dropped to 2,362 last month, a 27.6 per cent decline compared with 3,262 sales in June 2011, and a 17.2 per cent drop over the previous month of May.
“Overall conditions have trended in favour of buyers in our marketplace in recent months,” said Eugen Klein, the board’s president, in a news release on Wednesday. “This means buyers are facing less competition and have more selection to choose from compared to earlier in the year.”
June sales were the lowest total for the month in the region since 2000 and 32.2 per cent below the 10-year June sales average of 3,484, the report shows.”
– from ‘Vancouver sales hit 10-year low, real estate board declares a buyer’s market’, Vancouver Sun, 4 July 2012 [hat-tip Loon]
One will be hearing much talk of a ‘Buyer’s Market’ in local media in the near future, and Vancouver Sun/REBGV news release is an example. Most readers on the Vancouver RE blogosphere are very familiar with the difference we refer to, but, for sake of the newbie reader, we thought we’d pop up this post in an attempt at clarification.
The RE Board of Vancouver uses the ratio of sales to listings to decide whether to call the market a ‘seller’s market’, ‘balanced’, or a ‘buyer’s market’. Thus, if listings are high and sales are low (as they are at present), it is automatically deemed to be a ‘buyer’s market’.
This ratio can also be expressed as MOI (or ‘months of inventory’), the theoretical number of months that sales at the current pace would ‘clear’ the inventory (total listings). There is a good correlation between high MOI and downward pressure on prices. See jesse’s articles at ‘Housing Analysis’ for eloquent discussion of that relationship.
Thus, when the REBGV refer to a ‘buyer’s market’, they mean one where sales are low compared to total listing. Note that this in no way refers to absolute price levels. Yes, it is better for a buyer if there is a low sales:listing ratio and downward pressure on prices (more homes to consider, less time pressure, more bargaining strength) BUT it is immediately apparent that absolute price levels are far, far more important to a buyer. The buyer gets more for their money when prices are lower.
In our own terms, and from the perspective of the vast majority of prospective buyers, it is far better to buy a property that is priced at fair value than it is to buy a very, very over-priced property that happens to be falling in price from very, very over-priced to merely very over-priced.
A true buyer’s market is one where the buyer receives good, or at least fair, value for their money.
Vancouver prices have only recently begun to weaken from their stratospheric heights.
By fundamental measures, they ran up, in the speculative mania of 2003-2011, to levels that are two to three times fair value. Prices have weakened by about 3%-14% since the 2011 peak, depending on which sector you look at, and which price measures you use.
This is not by any sensible measure now a true buyer’s market. It’ll be a buyer’s market when prices hit the vague vicinity of fair value; they still have a long way to go downward prior to that.