So what will the numbers look like next week? As far as Vancouver goes, they’ll be brutal. Casualties downtown plus in the burbs. And if Will Dunning’s correct, people in Halifax, Winnipeg, Victoria and that flat part in the middle can expect more of the same.
In a moment, the latest body count from YVR. First, what economist Dunning says is going to happen. By the way, this guy’s been in the housing analysis biz for 34 years, half of which were spent at CMHC. These days he’s chief economist for Mortgage Professionals Canada. Pray for him.
Dunning has released a report called ‘Slamming on the Brakes’ wherein he claims the finance minister’s October 3rd announcement (including the MST – Moister Stress Test) is about to rip through the entire real estate market. This is what he forecasts.
Ouch. Could such things actually occur here in Canada – where the laws of economics don’t apply? Where interest rates can never rise and caesarstone counters are an inalienable right?
Actually, they already are. So don your combat helmut and flak vest and crawl with me through the razorwire into the mayhem of Vancouver. Hey, here’s famous Re/Max realtor Steve Saretsky lying prone in a puddle of indistinguishable battle goo. Whazzup, Steve?
“It’s evident we have witnessed the peak of home prices,” he whispers weakly, quoting his recent blog. “I believe we have just witnessed one of the most impressive housing bubbles in history.” A small scarlet rivulet flows from the corner of his mouth.
The fact is buyer demand has crashed and burned as a result of Morneau’s mortgage mayhem, combined with the Chinese Dudes tax, layered over a market which speculation and greed had shoved to unsustainable heights. The sales-to-active listing ratio has cratered, and demand’s fallen every single month since it peaked in March. Van West, Van East, Richmond and Burnaby are now all (officially) buyers’ markets, with almost a year’s worth of houses piling up.
“Demand continues to drop,” Steve murmurs, his twitching face bearing witness to the blunt agony of shattered limbs, perforated organs and lost commissions. “The detached market clearly favours the buyer and will almost surely be the same for the condo/townhouse market in the coming months. It seems like an absolute certainty that the new lending policies will slow the market further.” And he goes silent.
On the battlefield, sellers are losing badly. In the first three weeks of October sales have collapsed year/year by 72% (almost 760 last year, just 150 now). Average prices have quickly and dramatically retreated to 2014 levels, and continue to erode. Six months ago 61% of all detached homes trading hands sold for more than the vendors were asking. This month that’s dropped to just 11% – proving there are some greater fools left on the loose.
This means almost 90% of all detached houses in YVR – the crown jewels of Canadian real estate a year ago – are trading for less than list. Soon it will be 100%, and soon after that, prices will fade as buyers realize bidding wars are done, sellers are getting whipped, and they can pony up a lot less. It’ll take some time for this message to ripple, street-to-street, given the opacity of real estate information. After all, the first casualty of war is truth.
At the moment there are about 3,400 detached houses on the market in Vancouver. This month 150 sold. Do the math. Prepare.