Greater Vancouver Real Estate - Supply & Demand

A few months ago, "Housing Analysis" posted some very interesting data on the supply and demand for homes in Greater Vancouver. The period covered was from January 2005 to October, 2009. View the link here>.

The average monthly sales for 2005, 2006 and 2007 was around 3,500 units, with seasonal higher sales from April to July and the lowest level of sales around December and January. The average listings was around 10,000 to 12,500 homes. The MOI chart showed that during the above 3-year period, the inventory was fluctuating around 4 to 5 months of suplly.

Months of inventory

A balance market is generally when there are around 6 months supply of homes. When the "months of inventory" (MOI) is above 6, home prices tend to fall. When the MOI is below 6, the market is bullish and home prices tend to go up. From May 2008 to March 2009, the MOI exceeded 6, and home prices fell. When the MOI fell below 6 in April 2009, home prices rebounded.

The Greater Vancouver real estate price chart below is seen to confirm the strength or weakness in the housing market.




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Historical listing data for Greater Vancouver

Home prices are affected greatly by the supply and demand for homes by home buyers and sellers. The chart above from the Real Estate Board of Greater Vancouver showed a steady drop in listings (reported for the month of December) of 1997 to 2003.

The supply & demand chart to the left showed that the housing market suffered an overload of supply when sales dropped sharply between April 2008 to March 2009 as a result of the credit crunch.

Home prices dropped by 15% or more in less than a year. However, by May 2009, home buyers returned in large drove, bidding up prices as there were more buyers than sellers.

Buyer vs Seller market

The balance of power between buyers and sellers can be tracked by following the list/sale ratio graph below:

The running 3-month list and sale ratios as shown on the chart to the left for 2008 and 2009 showed that there was more up-ward pricing pressure since July 2009 when the list to sale ratios was less than 3.

The market can only re-balance when more supply is coming into the market, or the sale pace slow down. It will appear that this may not happen until after the second half of 2010.

The housing market after the winter Olympics

While the public are inclined to speculate that the market will slow down after the winter Olympics, there are others who are cautiously optimistic that that housing market may be able to sustain at current level of activities. If a stable supply and demand for homes can be maintained, CMHC and others maintained that a moderate price gained for 2010 can be expected.

The next few months list sale ratios will be able to tell us more about the future direction for metro Vancouver's housing market.

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BC November Residential Sales

November Home Sales Continue at Torrid Pace

Vancouver, BC – December 9, 2009. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 165 per cent to 7,182 units in November compared to the same month last year. Last month posted the highest number of MLS® residential sales for the month of November since 2005, when 7,721 units changed hands. Triple-digit gains in province-wide unit sales reflect a low number of unit sales in November 2008.

“BC home sales remained at an elevated level in November,” said Cameron Muir, BCREA Chief Economist. “Low mortgage interest rates, pent-up demand and strong consumer confidence continue to be key drivers in the market.”

The torrid pace of home sales in the Fraser Valley, Vancouver and Victoria has propelled the provincial total to near record levels. However, consumer demand in these markets is expected to moderate in the new year as pent-up demand is largely expended and higher home prices erode affordability.

Year-to-date, MLS® residential sales dollar volume increased 21 per cent to $36.8 billion over the same period last year. A total of 79,325 units were sold in the first eleven months of 2009, up 19 per cent from 2008, while the average MLS® price increased 2 per cent to $463,555.

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