The Bear has gone to sleep

As many of you know, people refer to “Bull” markets when prices are going up, and “Bear” markets when prices are going down. People in the Greater Vancouver area have just received their Assessments that showed that in the whole lower mainland prices went down from July 2018 to July 2019.  These numbers “mark only the fifth time since B.C. Assessment’s inception in 1974 — and the first time in 20 years — that the province’s assessed values saw an overall decline. (B.C.’s overall assessment values also decreased in 2000, 1999, 1987 and 1983)” (Vancouver Sun). It was a Bear market.

But, winter is here, and it appears that the Bear in the Vancouver Real Estate market has gone hibernating. Low sales are typical of Bear markets, and after a spring where sales were at a 20-year low, Fall sales picked up, and they have returned to long term-year averages:

Total sales for H1 (Half 1) and H2 (Half 2) since 1998. The highest numbers are shown in red, lowest in blue.

High inventory numbers are also typical of Bear years. 2019 started with an inventory kind of in the middle. But [Total Inventory] = [Previous Inventory] + [New Listing] – [Sales] – [Delistings]. Unfortunately, New Listings in 2019 were low (see Jacob’s post), and the higher sales in the second part of the year took a toll in the total inventory, as seen in this graph:

Edited to make colors more contrasting, and added a label to the last point, thanks Jeff for the suggestion.

This means that we ended 2019 with an inventory below the long term average:

The increase in sales, and drop in inventory, has produced a steady increase in the Sales to Active Listing Ratio (#Sales/Total Inventory at the end of each month):

Click on a desktop to enlarge

What does this mean? As we discussed in a previous post, SAL is very predictive for price changes in the following months. A SAL above 18% is expected to produce price increases a few months after. Since May 2019, SAL has been 18% or higher most of the time. Indeed, the last three months it has been ~23%. Price stabilization and moderate increases are expected with these values. Indeed, the House Price Index is showing moderate increase in prices:

Numbers on the right are % drops from the maximum. Note that this is corrected by inflation

And if you look at the Sold Price vs Assessed Price 2019 (thanks Johnny!), there is clearly a trend as well:

Aggregated, all property types. Filters applied: 1) House Age 3 years or greater; 2) Sold-Assessed <100% (Remove outliers); 3) Assessed price 100k to 5M; 4) Board REBGV. Dates are reported sold dates (Entry date).
Per property type. Filters applied: 1) House Age 3 years or greater; 2) Sold-Assessed <100% (Remove outliers); 3) Assessed price 100k to 5M; 4) Board REBGV. Dates are reported sold dates (Entry date).

We can conclude that the Bear in the Real Estate of Metro Vancouver has gone to sleep for the time being. Why? In our next blog post we’ll discuss some of the factors that have played a role.

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