Learn how supply and demand constantly affects housing prices and the impact it has had on Vancouver housing.
I am revisiting an update I wrote some years ago, when we hit a similar patch of “gently increasing inventories” and dropping sales – leading to softening prices (with some minor modification e.g. W/Van detached). Just thought it seemed pertinent as it reinforces the repetitive cyclical nature of markets.
We know we live in a democracy, but not everybody realizes that there is a tyrant (?) – depends which side you’re on – that dictates our lives. Obviously, my old “hobby-horse”, embodied in the term ‘willing seller/ willing buyer’ is that of which I speak.
Say, for a minute, the Supply side represented by potential sellers, got together and said… buyers (Demand side) are not appearing confident to make the decision to buy. Therefore it makes sense to take our homes off the market (or not add them to the supply pool). But, I hear you say, that is not realistic as so many of us really want to (need to) sell. Precisely my point! Now, and this is not meant to be facetious; Sellers, realize that it is your collective wants and needs that will cause prices to drop.
Supply must decrease or the confidence of the buyers must be restored. We do know that a very large part of that “damage” can only be repaired by the actions of our neighbours to the south. Just how long will that take??
BTW this is what has actually happened to inventory (homes for sale) Aug 31/11 to Sept 30/11. Note: this is month to month and does not contradict the Y-to-Y figures cited later.
N/Van – Detached +27%; Attached +1%; Apartments +16%
W/Van – Detached +12%; Attached +36%; Apartments +6%
For that period a few years ago there was a report from an eminent economist for a major Canadian bank that went along these lines, “over (a recent period) it has gone from being a hot sellers’ market to a more balanced market …. projecting that over (a future period) it will correct further into a buyer’s market, something not seen in Canada since 1995”. “A (relatively small) per cent drop in prices from current levels should bring the national average back to equilibrium” … a mere fraction of the (almost fourfold) overshooting in the U.S.”.
Just a quick comment on price trends. I consistently use average price, comparing year-to-date with that of the previous year. This I believe is the most readily understood statistic although many other analyses can be done; median price, mean price, price index changes etc. Average price is not perfect as it can be distorted by small sample size e.g. a month in say W/van [two duplexes sell -$650k & $950k -> $800k average] and then the next month [one $1.2mm duplex sells]. Has the market price really jumped by 50%? – obviously not.