Days ago we detailed the gulf between the deflating West and the bloating East. Apparently it’s worse than anyone thought.
First, the melt.
The official realtor stats out of Vancouver are awful, but fail to tell the real story. The local board says home sales crashed 40% last month (year/year). They were a fat 11% lower than the month before, and ten points below the 10-hyear average. “It’s a lukewarm start to the year,” deadpanned board boss Dan Morrison.
You bet. Fewer than 450 detached houses changed hands, a 57% crumble from the same time last year – and while sales wilt, supply surges. New listings are up 7% while total active listings have gained 14% over last year. It’s classic. Demand down and supply up. Given this dynamic, there’s no way prices can remain static, even though real estate’s notoriously sticky.
Here are the official declines: the Frankenumber for all houses, -3.6%. For detached homes it was -6.6% over the last six months (to $1,474,800)
Well, many people disagree. In fact the analysis of daily MLS stats published here earlier in the week put a lie to the official RE numbers. As you know they showed a 59% drop in solds last month, with a 14% reduction in price. The number of $3 million+ houses changing hands was 79% lower, with a current supply equal to four years of demand. Over $5 million, there’s a five-year supply. Worse, 91% of all the sales in January were for less than asking.
Now here’s bad boy realtor/housing analyst Ross Kay’s summary for YVR:
- Average purchase price paid last month, -19.2% (year/year)
- Over 84% of all homes listed for sale failed to find a buyer in January.
- Sales last month equaled the drop experienced in January, 2009 – the credit crisis.
- By the time someone who bought in January takes possession 90 days later, they’ll have lost an average of $32,000 in equity.
So, who’s zooming whom? Beats me. But right now my money is not on the Real Estate Board of Greater Vancouver.
The contrast with Toronto could hardly be greater, where the boil has yet to burst. Demand is outstripping supply, which has prices and emotions rising. The 5,188 sales in January represented an 11% jump over the same month last year but new listings tumbled 17%. The result was as inevitable as Vancouver’s decline – a price increase. More than 22%.
Here’s what the Toronto board had to say about it: “The number of active listings on TREB’s MLS system at the end of January was essentially half of what was reported as available at the same time last year. That statistic, on its own, tells us that there is a serious supply problem in the GTA — a problem that will continue to play itself out in 2017. The result will be very strong price growth for all home types again this year.”
Maybe. Maybe not. But for now the heat is on. The average detached in 416 is up 26%, to $1,336,640. In suburban 905, where happy cows once roamed, houses jumped 27% to a few bucks below a million. Meanwhile the fact most people cannot afford real estate with dirt has been driving them skyward. There’s now a 10-year low in condo inventory – merely a 4-month supply. (In contrast, there’s a 9 day supply of detached homes.) Listings of all types across the whole region are at a 16-year ebb.
What do these two markets tell us?
First, we’re in a spot of trouble. The economy, as discussed yesterday, is far too property-dependent. Current conditions in Toronto cannot and will not last because when average families can no longer afford average houses things have a way of correcting.
Second, any shock can impact a market in which prices are no longer supported by economic fundamentals. Mortgage rates. Job loss. A Trump border tax. Chinese Dude tax. Back-to-back Adele and Bieber concerts. Anything.
Third, the TO listings drought indicates a sick market. People are not selling because they fear buying. And how can you blame them? Having your prostate removed with a turkey baster would be more fun.
Fourth, credit is tightening. The banks ain’t stupid, and have been quietly, steadily reducing pre-approval amounts, appraising lower and lending less. Meanwhile Ottawa’s on the verge of even more cooling measures – which the 22% GTA January price hump will certainly hasten.
So, if you can afford a house and your spouse will debone you without one, go ahead. Just don’t expect to make any money. In fact, expect to lose some. Maybe a lot.