‘Drop From Peak Chart’ and Recent Market Action – Paint Dries Faster In Vancouver!

click to enlarge

A ‘Drop From Peak Chart’ constructed and posted by ‘an observer’ at their invaluable blog, ‘Vancouver Price Drop’ [8 Feb 2013]. [click to enlarge]

This elegant chart shows how SFH (single family home) prices in various major markets in the US descended from their peaks.
Superimposed on this is our own BC Lower Mainland SFH price drop. At eight months into the LML descent, we are outstripping the rate of price drop experienced by all US markets, save Miami.
It may feel like prices aren’t budging, or that they are dropping very slowly, but this is not the case.
– vreaa

In a related vein, these very useful market updates and commentary from yvr2zrh (zrh2yvr) at VCI 8 Feb 2013 11:15am & 9 Feb 2013 3:00am; and at VREAA 9 Feb 2013 1:23pm

Market Overview:
“A couple of views 1 week into the month.
1.) Every person who did not sell in Van West last year seems to be hitting the list button this week. We are on pace for close to 500 new listings in one month of Van West – – this is by far a record.
2.) Detached listings are up more than attached and sales are down more than attached. We are on pace for 10+ MOI on detached for Feb – – yeah – Mr. Muir – sellers don’t have to sell eh??
3.) Sorry to be a broken record but – – Richmond – Dead. Forecasting close to 1,000 listings at month end already and 18 MOI. Must be fun . .
4.) Van East attached – pretty balanced – still. Projecting 5 MOI this month which is still up from 4 last year.
5.) Biggest loser? West Vancouver. Forecasting 18 MOI this year for Feb compared to 6 last year. North Van at 6 compared to 2.5 last year. North Van is one of the true middle class (low offshore spec) areas left. 2.6 MOI last year was still very very tight – – at 6 – it’s not bad but really slow for spring. Generally North Van just suffers from low amounts of spec sales so generally not very high inventory.
6.) Burnaby? I’m not joking but last year it was MOI of 3 in Feb and this year we are looking at 12. Oh well – – sorry if you’re trying to sell in Burnaby.
7.) Finally- Van West – – Should end up with 9.5 MOI. Last year, when we thought things were pretty soft already – it was 4.5 (a high amount for Feb). . .
If we end Feb with less than 1700 sales – the HPI will be flat to only modestly down (a big achivement for Feb). . .
Using REBGV numbers – I currently forecast over 15K for Feb inventory. Compares with 14K last year. Note that this excludes bare land and multi-unit properties.
As a trend – – Feb is worse than Jan on a seasonally adj basis.
However- as you all know – – people just don’t have to sell – – and – – as we all know – – People never have to buy.”

Comparisons With 2009:
We all know the market is bad, regardless of any realtorspeak that has made the press in the past week. We also mostly know that the worst period in Vancouver real estate was from September 2008 through about March 2009. Those months were the lowest sales since 2000 and some of them (such as Nov/Dec 2008) are unlikely to be reached again in the future. However, right now we are again at an inflection point. On a market wide basis, February 2013 is shaping up to be the 2nd worst Feb in recent years. However, as you look at the pockets – it is clear that there are some where performance is much worse.
So – Comparing Feb 2013 with Feb 2009, here are some general thoughts based on the current trend.
1.) Sales are higher in 2013 and should be about 10% over Feb 2009. This is a massive deterioration from last month as Jan 2013 was 75% over Jan 2009. This is the effect of a market that is weakening now compared to a market in 2009 that was strengthening.
2.) Listings are much higher than 2009. 2009 was low but in 2013, we are 1.5 StdDev above the average from 2002-2011. So – given that the board is saying people won’t list – I think it is a wish more than a fact. (they are trying to re-create the 2009 market by removing listings – which actually happened then as people were in a state of shock – this is not happening now – people have lost a lot of money and they do not want to lose more . . . so they list).
3.) We are on track for worst sell to list in any February in recent history.
4.) Some markets are worse. Van West Detached forecasting worst Feb in history with lowest sales and highest listings. Don’t know if anyone has access to Van West Detached listings for past 15 years but did we ever have over 400 listings in a month?
5.) Richmond Detached – heading for worst Feb ever. . . .
6.) Even Vancouver West Condos – Volumes looking to be below 2009 with higher listings. (We are not however seeing record listings in Condos – they are high but we would need 20-30% more listing volume here to show panic – – – )
7.) Van East detached – Not seeing the same panic in listing volume as Van West. Sales are down however. Lower inventory and lower listing rate will keep MOI here a bit lower (i.e. 8 instead of 12)
8.) Richmond Condos? Panic !!!! Sell now or forever eat Dim Sum and live in the Mandarin Residences!!!! Not sure why you would ever buy a condo there until 30-40% price decreases occur.
9.) West Van – – Sales volume quite similar to 2009, slow – – but listing volume is way up. I would say it is Panic there in a West Van sort of way. Think about it – West Van has 10,000 detached homes. At the current selling rate, the turnover in the real estate stock would take 30 years. Seems a little long – the average time in a house is likely not that long . . !!! Good luck to them all.
10.) North Van Detached – Modestly better than 2009.
11.) Burnaby – Sales rate is similar but listing rate up 42%.
February is barely a week old. However – it is already certain to be the worst Sale to List ratio ever and have an inventory increase not seen in any other February.

Move-Up Market Freezes:
“It is amazing. Friday had 1 sold and 25 new lists for Van West detached. Almost all stats continue to point to problems. We are getting seasonal increases in average. Not sure why really as the median is going down but average seems to be sneaking up – likely because of a few $10M properties selling on low sales. In any case – – One thing that just has to be hurting this market is the continued flat-down prices on condos. I just have to look at all the young people that I worked with in Vancouver in 5 years that had bought condos since 2007. So many of them are now at that stage in life where they should be looking to get to the next step. However, they have no equity from investment gains and transaction costs will eat most of their savings equity. They make decent income but pay $1800-$2000 per month to live in a 650 sq ft 1 bedroom. That really sucks – – One of my friends is really nice, super smart, motivated and a good worker. Can’t seem to get a better job and wants to move to a house in North Van (Must be the Persian connection.). However, . . . he’s stuck in a Rennie Special . . . . . . after 5 years of slaving the mortgage payments, the person that made the most money was Rennie himself – – ;. . . .
Anyhow . . . I’m looking forward to March as for sure it will be below 2009 . . . . . one month earlier than last year.”

Further commentary on Vancouver price weakness in a recent post by Ben Rabidoux at The Economic Analyst [Real estate sales in Vancouver, Victoria crumble in January; Rot is worse than headlines indicate 5 Feb 2013]. Excerpt:
“January sales-to-new listings ratio.. was the second weakest in well over a decade (next only to January 2009 when people were still not sure if the financial system would survive) and a months of inventory reading that is the second highest in well over a decade. I’ve only compiled detailed data for Vancouver back to 2000, but I suspect that, outside of 2009, you’d have to go back to the early 90s to find numbers this weak. In short, January was a brutal month in Vancouver.

On 28 Nov 2012 Ben gave a presentation in Vancouver on Canadian Housing that was discussed in a thread here 29 Nov 2012. The full presentation is up on youtube, for those who haven’t yet seen it:

‘Canadian Real Estate: What happens next?’, Ben Rabidoux, Vancouver, 28 Nov 2012

33 responses to “‘Drop From Peak Chart’ and Recent Market Action – Paint Dries Faster In Vancouver!

  1. Pretzels...thirsty

    I see at least a 40 percent correction and would not be surprised if it is by the end of this year. Fear trumps greed
    The “million dollar” homes in east and south Vancouver are realistically around 600K taking into account other factors such as rent to price ratio, economic fundamentals (lack of), and average earnings.

    • Even Las Vegas didn’t drop that fast, and that market was full of speculators from California who couldn’t afford the bubbly prices of investment properties at home.

      No, it’ll grind down. People with negative equity can’t sell unless they can bring the difference to the closing table. Others figure things will correct quickly and start going up again (see Royal LePage’s Phil Soper, who says that nationally we’re already halfway through a 12 month slump. Whatever, Phil; just keep sending me my dividend cheques!), or that the government will step in with… something. China’s picking up, US homebuilding (thus BC lumber sales) are picking up, and there’s probably 20 other reasons optimists are relying on to avoid thinking about the unthinkable. Price dissemination is slower than in the stock market. There’s no public bid, only public asks.

      The next stage might see some real estate agents start to (selectively or otherwise) turn down new listings.

      • Pretzels...thirsty

        I don’t disagree with you, but “its different here” 🙂

        I have lived in many different parts of the continent and the prices here are so out of touch with reality (like a huge ponzi scheme) that a 40 percent correction equivalent to 15-20 percent correction in places like California or even Las Vegas.
        I think that the bottom will fall quickly followed by a long descent.

      • Good point about Realtors, Ralph. They can only stretch themselves so far in a slow sales environment and unless revenue is coming in they won’t be anxious to do any listings where vendors are not motivated and pricing according to what the market is demanding…..ergo, if a vendor won’t relent on expectations of price that the realtor knows is out of touch then they won’t go to the trouble to do the listing.

        Reality is about to set in as sellers get the heave-ho from agents.

  2. “after 5 years of slaving the mortgage payments, the person that made the most money was Rennie himself”
    Not bad for a high school drop out!

  3. The drop from peak charts come, at earlier instances, from seattlebubble’s The Tim.

    Vancouver tends to have more seasonal fluctuation than other areas, on that note look at Seattle for larger seasonal effects.

  4. The numbers tend to say less as market forces take over. From here on, it’s all about confidence and future price expectations. A home is worth $0 until it’s sold. That’s the way I see it.

  5. Wow. That was quite the post, Vreaa. I loved the chart (a picture paints a thousand words) and all the detail offered by yvr2zrh and observer. Great work you guys.

  6. The overall pattern of the chart seems to show a slow grind down for the first 16 months or so, and then the dam bursts and many cities go into freefall for about 20 months, before bottoming and going sideways, or staging a modest recovery, for the final 12 months. That would be consistent with an initial stalemate period during which a number of sellers are holding out, hanging on, exhibiting denial etc., before a critical mass of those who have to sell builds up, the direction of the market is no longer deniable, and the rush for the exits begins. The bottoming occurs when fundamentals begin to reassert themselves.

    • Top to bottom or top to “flat” seems to take between 30 to 36 months (2.5 to 3 years).
      I can live with that. 8 months are behind us, so that gives us 22 to 28 months to go. 2015 could be a good time to buy, unless some miracle blows more hot air into our real estate “balloon”

    • Good analysis, except for that last part. While fundamentals played a part, the primary reason US house prices stopped their fall in 2009 was the massive liquidity injection by central banks. In a globally coordinated effort, central banks around the world torpedoed interest rates at the same time that their respective governments pushed through large fiscal stimulus plans. The net result was a “bounce” in prices around the world. See the graph below for a good “birds-eye” perspective of what really stopped prices from plummeting worldwide:

    • Looking at that chart, and at the excessive male population of Gen Z . . . does immigration Canada try for any sort of gender balance?

      I’m guessing that’s where the imbalance is coming from, more males immigrating that females. Much of the world has surplus males who would be motivated to move to find mates.

      • Ralph Cramdown

        Males always outnumber females at birth. Recently however, scientists have shown that ultrasound appears to have severely deleterious effects on female foetuses of South Asian and Korean descent.

      • So they are coming to Canada to find girlfriends, AG? Good luck with that. Canadian women are impossibly stuck up and demanding. Is it any wonder so many of them live alone with a cat?

      • Ralph, that was exactly my question. In western countries sex selection tends to favor girls, not boys, so my assumption for the skew to boys which seems in excess of the natural 1% or so was due to immigration. Just wondering if anyone knew of any official analysis on that. Or if Canada had a policy to keep things balanced, given the large impact immigration has on the country. If not, you could be importing the upheaval that comes with this gender time bomb.

      • Allow women to have up to four husbands. Problem solved.

  7. Totally anecdotal, but my god, the number of for sale signs that are blossoming all over the west side is startling… you can really see it when you drive the same route day in and day out.

    • I watch every day how many new listings get posted on MLS in White Rock, I think it was 23 Friday and 26 today. There’s usually only 1 or 2 new ones that get posted on a Sunday, there were 26 today! 23 is very high too, I’ve been watching since last spring and the # rarely gets over 20.

      • Some realtors advised to list just before of the Chinese New years as it is the time of most visits from the mainland China (their most traveled holiday) and it was a time of the peak in sales last year. May be the listings won’t be coming out in the bunches like that on a reg. basis.

    • UBCghettodweller

      Seconded. I just saw a huge crop appear this weekend. I also saw a number of houses I thought had sold after being listed for the better portion of last year stick the “for sale” sign back up. It seems that there is at least one house for sale on every block right now.

      • LS in Arbutus

        I am seeing that as well, houses that were for sale last fall, now re-listed now. I too, had assumed they had been sold.

    • Agree with olga, this looks like fresh meat for the much-anticipated CNY surge

  8. a realtor told me Vancouver prices cant go down because we have clean air and world-class shopping …………….although i found shopping in Vancouver terrible, poor selection, outrages prices, i guess its so world-class ,, border line up’s to get out of here are through the roof and Robson street is half Vacant

    • UBCghettodweller

      … world class shopping, which is why everyone with a car seems to go south of the 49th for anything from cheese to blue jeans and computers.

  9. I renewed my mortgage in sept 2008 5 year @ 5.75% it was the best rate being offered those days not sure what the rate was in early 2009.
    So with such slow sales an the 5 year rate at 2.99% I see a crash coming.

  10. FYI Whistler prices way down, quite a few foreclosures, however listings are at a 5 yr low…curious what’s in store over true next few years

  11. A deluge of listings in the past week? Gung Hay Fat Choy!

  12. What does MOI stand for in the overview?

    • Months Of Inventory.
      It’s the theoretical number of months it’d take to clear all the inventory currently on the market for a given region at the current sales pace for the region. Thus, higher numbers are bearish.
      jesse/YVRHousing has done a lot of work on the price predictive capacity of MOI over at Housing Analysis.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s