Keith Roy & Associates
Direct:1 (604) 264-6661
Office:1 (604) 263-1911
Fax:1 (888) 223-1021
Email:ClientCare@KeithRoy.com
Macdonald Realty Ltd.
2105 West 38th Avenue
Vancouver, BC
V6M 1R8 CA
Wednesday, July 4, 2012

Time to Cash Out?

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Time to Cash Out:

Is the Vancouver real estate market heading for another crash? 


*This version has been edited because it was deemed by some of my colleagues to be disrespectful to the industry of which I am a part.


 

I’m a REALTOR and I sold my own home 4 weeks ago.  It wasn’t too big or too small.  It’s only 6 years old and still feels new.  I sold because in 6 months my home will be worth less than it is today.  I think its time to cash out!  Let me explain.....

 

To ignore the truth doesn’t change the truth.  And so it is in the Vancouver real estate lately.  The facts are simple; real estate is easier to sell when prices are going up, realtors are happier when more houses are selling and open houses are more fun when buyers come to look.  However, the good times pass like the bad ones do.  I would suggest that good times have passed in the Vancouver real estate market, at least for the foreseeable future.       

 

Here is a great example of where the real estate industry loses the public trust.  The headline of the June 2012 Real Estate Board of Greater Vancouver Newsflash is “Greater Vancouver housing market favoured buyers in June”.  The opening line was a bit more accurate: “The number of residential property sales hit a 10-year low in Greater Vancouver for June, while prices remained relatively stable.”  But what does “relatively stable” mean in a market as hyper sensitive as Vancouver where real estate is a hobby, sport, profession, retirement plan and cocktail party conversation all rolled into one?  

 

The Greater Vancouver real estate market is anchored on the west side of Vancouver.  With its limited land supply and stunning views of English Bay and the north shore mountains, the west side of Vancouver from Main St. to UBC has always been a hot spot for Canadian real estate.  It has been 2 generations since owning a home on the west side of Vancouver made sense for an average income family and I doubt those days will ever return.  The west side housing market is a great bell weather for the rest of the lower mainland because it drives media headlines and experiences the largest swings.

 

Two key factors drive real estate activity - Supply and Demand.  These factors work together to determine volume and prices.  The equations looks like this:

 

Low supply + low demand = Prices are stable.

High supply + high demand = Prices are stable.

Low supply + high demand = Prices go up.

High supply + low demand = Prices go down.  

 

Remember, according to the real estate board of Greater Vancouver, prices in June remained “relatively stable”.  Stability is a result of low supply and low demand or high supply and high demand.  And in a dynamic real estate market such as Vancouver one month does not determine “stability”. 

Lets look at the numbers:

 

Supply

WEST SIDE MLS DETACHED LISTINGS 2003 - 2012 

          

                 

                

                

                

              

                

              

               

               

                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Average

 

 

 

 

 

 

 

 

 

 

 

 

JAN

592

489

442

370

344

374

694

380

402

796

488

FEB

634

498

473

359

375

430

708

430

463

777

515

MAR

710

556

472

404

384

514

677

521

525

854

562

APR

737

581

508

412

469

690

653

669

590

949

626

MAY

760

686

511

452

448

862

591

794

599

1,067

677

JUN

803

783

502

477

499

982

586

797

603

1,078

711

JUL

810

799

520

502

466

996

551

720

632

 

666

AUG

741

769

551

530

422

915

497

681

643

 

639

SEP

746

784

574

622

504

1053

570

675

823

 

706

OCT

682

720

545

621

422

1014

527

575

827

 

659

NOV

604

642

486

507

394

949

451

450

705

 

576

DEC

511

500

374

385

291

756

325

331

558

 

448

 

There are only 4 months in the last 10 years where the number of available houses on the west side of Vancouver was higher than 1000 - September and October 2008 and May and June 2012.  

 

The truth of the supply side of the equation is: 

 

There are more sellers competing to sell their home on the west side of Vancouver now than at any time in the last 10 years! 

 

Demand

WEST SIDE MLS DETACHED SALES 2003 - 2012 

 

               

               

              

              

               

              

              

              

            

              

               

 

 

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Average

 

 

 

 

 

 

 

 

 

 

 

 

JAN

112

103

67

77

90

75

46

102

134

86

89

FEB

142

150

136

159

133

138

100

130

242

177

151

MAR

175

170

200

176

170

136

144

208

279

152

181

APR

168

205

205

158

162

121

193

193

214

130

175

MAY

179

179

210

201

246

142

232

150

228

122

189

JUN

180

154

185

181

177

105

200

147

213

102

164

JUL

197

139

142

122

170

88

180

122

139

 

144

AUG

176

115

156

119

158

46

202

134

130

 

137

SEP

161

125

160

106

112

46

175

143

104

 

126

OCT

186

119

133

140

156

52

200

161

120

 

141

NOV

160

113

121

121

115

25

141

161

121

 

120

DEC

101

103

102

65

56

56

133

116

62

 

88

 

 

Demand for homes on the west side of Vancouver is falling.  In fact, it has been falling for 5 straight months.  Demand has actually been about 35% - 40% off of the 10 year average for 4 months now.  If this trend keeps up the number of sales in July will drop below 100 - which it has only done once in the last 10 years - July 2008 - which was just  4 months before the worst month ever which produced one of the sharpest price drops Vancouver has ever seen.

 

The truth of the demand side of the equation is:

 

Lowest June home sales on the west side of Vancouver in the last 10 years!

 

So the new equation looks like this:

 

   More sellers than ever 

+ Less sales than any previous June 

____________________________________

Today’s real estate market

 

As a REALTOR I can assure you people are still buying homes.  In fact, 2362 homes were sold in June in Greater Vancouver (Remember, this is the lowest number of sales in the Real Estate board of Greater Vancouver in 10 years).   There are all sorts of reasons people buy and sell homes - not just price.  Whether it is a newly married couple who want a place of their own, a lower income buyer taking advantage of mortgage rules before they change, growing families, empty nesters, downsizing seniors or people moving up and down the property ladder who don’t want to rent, there will always be sales.  Demand will never reach zero.     

 

Right now, supply is up.  Way up.  Demand is down and trending lower.  I hate to point out the obvious, but prices are a result of supply and demand.  In today’s real estate market, the equation looks like this: High supply + low demand = Lower prices.

 

There is still lots of opportunity to sell your home.  I’m just not sure how much longer it lasts.    Prices have started to fall but demand is nowhere near the levels it dropped to in fall 2008.  Different product types have different dynamics.  Condos, townhomes and luxury homes are all markets unto themselves.  But its the west side houses that make the news headlines.  If the media picks up on this story, you can be sure the rest of the market will follow the west side.  If you are on fence about selling your home, thinking of cashing out, nearing retirement or need your equity to buy your next home, now might be the right time to call a REALTOR.  Otherwise, I’d plan to hold on for another rough ride.   I think 2012 will be another one of those years where Summer is better than Fall.

 

Keith Roy is an award winning REALTOR at Macdonald Realty in Vancouver, BC.  He has been ranked in the top 10% of all Greater Vancouver REALTORS for the last 5 years.  Keith sold his own home 4 weeks ago based on these numbers.  Keith can be reached at homes@keithroy.com

Comments

by Darcy on Thu, Oct, 11, 2012 05:34 PM
Thank you for speaking the truth in an industry and world that chooses to take the lower road. Those that have even a little commonsense know the sky is falling.

Because of your honestly you will probably always be successful in what you do.

Have a great day.
by Steady Eddie on Thu, Oct, 11, 2012 10:26 PM
To all the realtors that complained about this article, remember that omission or fudging stats is the same as lying ... it is immoral.
by Anika on Sat, Oct, 13, 2012 05:50 AM
Thank you for your honesty. There are very few realtors out there who are as upfront as you.
by Jelly Donuts on Mon, Jan, 21, 2013 02:06 AM
Rare to find a real estate agent who speak real truths. You are to be applauded for your honesty.
by S A on Wed, Jan, 23, 2013 12:45 PM
I hope your honesty brings you immense success. How many realtors would ever be so truthful and look out for the people they are expected to serve.

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