Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Sunshine Coast Real Estate: A Seller's or Buyer's Market?
03-07-2014, 08:25 PM, (This post was last modified: 03-14-2014, 07:39 AM by Skook.)
#1
Sunshine Coast Real Estate: A Seller's or Buyer's Market?
It has been assumed by some that I am a renegade real estate agent - that's a not! This post should help remove any doubt.

Before involving myself with VanPeak, I had never, ever looked at real estate sales stats. When I started looking at the REBGV’s monthly stats package for Sunshine Coast data, there were more than a few items I ignored because I didn’t understand them. Slowly, I’ve gotten a handle on a few like the HPI and Benchmark Price; well, as best as one can get a handle on that esoteric data.

With January and February’s stats packages, I decided it was time to figure out what the Board was conveying with the “% Sales to Listing” figures. I did a Google search and that only brought up info on the ‘Sales Price to Listing Price’ ratio and that didn’t seem right; so, I posted a question on our sister site, Vancouver Condo Info. Unfortunately, they’re awfully busy HAMing it up, so I thought maybe I would check the REBGV website - duh. After looking around the site, I thought I would give FAQ (Frequently Asked Questions) a shot. I scanned down the list and based on what I had gleaned via my Google search results this caught my eye: “What’s the difference between a buyer’s and seller’s market?” Bingo!

Here’s how the REBGV answers that question:

Quote:The real estate market is cyclical – which is why you may have heard the term, “real estate cycle.” Several key factors influence this cycle, including interest rates, employment growth, investment growth, construction and even immigration. All influence whether there is a buyer’s market or a seller’s market.

A buyer’s market is when there are many more homes for sale than there are buyers. As a result, prices may drop over time as home owners become eager to sell their property.

A seller’s market is when interest rates are low so there are many qualified buyers and not many homes for sale. Buyers must make quick decisions and face multiple offers on the home they have chosen to buy and prices can rise.

To measure market activity, the Real Estate Board has a unique tool. It’s our Sales-to-Listings ratio which measures the balance between demand and supply.
  • a ratio of three sales for five listings means we are in a seller's market (also known as a ratio of 55 – 60%).
  • a ratio of less than 7 sales for every 20 listings means we are in a buyer’s market (also known as a ratio of less than 35%).

The REBGV has offered simplistic answers to what spurs both a buyer’s and seller’s market; however, they needed to keep it light for brevity’s sake. The Board’s explanation for either is worthy of discussion on another day.

My interest for this post is the Board’s “unique tool” - its Sales-to-Listing ratio measuring the balance between demand and supply. When I read that quote, my first thought was there must two ratios; however, after playing with the numbers, my conclusion is that it is one ratio that can be treated in two different ways: one will determine a seller’s market and the other a buyer’s market. I will show you what I mean.

I am going to use the Sunshine Coast February detached sales data. According to the REBGV, there were 23 detached home sales and 112 new detached listings. If I divide 23 by 112 = 0.21 x 100 = 21% which is the Board’s detached “% Sales-to-Listing” figure. So far, so good.

So, there were 0.21 sales per 1 listing. If I multiply both by 5, I get 1 sale per 5 listings. According to quote above, 3 sales for five listings signifies a seller’s market. Nope, February was not a seller’s market on the SC.

If I take 0.21 sales per 1 listing and multiply both by 20, I get 4.2 sales for every 20 listings. This is definitely less than the magic “7”. So, in February, the SC was a buyer’s market.

So, according to the ratio, in February the supply of new home listings far outstripped demand. It seems so obvious. I patted myself on the back for a job well done and then thought, “Hmm, I would like to see this “% Sales-to-Listing” ratio in a chart. So, I grabbed the percentage ratio numbers going back to 2010 and added both a 35% and 60% horizontal line to really make it interesting. Below is the result.

[Image: attachment.php?aid=776]

Oh, my golly gosh. Look at that - only four months in 4 years offered a seller's market. Now, the Board says 55-60% signifies a seller's market, but lowering the 60% bar to 55% in a market the size of SC isn't going to make the pill any easier to swallow; so, it would give us 11 months out of 50 - whoopee do.

Okay, that was fun, but what if I go back even further like say to 2002. What would the chart look like if it included both the detached sales and new detached listings? Well, let’s find out.

I first had to collect all the data and here it is in nice, neat tables with only three months missing - not bad. The S=sales, L-new listings and S:L=Sales-to-Listing ratio. Check out the ratios from 2002-2005; as the BC Oracle would say, “Wow.”

[Image: attachment.php?aid=777]

Yes, in those early years of 2000, demand was high and supply was low and homes were cheap. Is it any wonder that developers came swooping in to buy up land and begin developments. Those who got projects on stream in 2004 and 2005 did very well; but look at 2006 - the ratio is beginning to dive.

The aftershock of world events was beginning to kick in. The attack on the World Trade Centre (2001) led immediately into the war in Afghanistan (2001). Then the US invaded Iraq in 2003. These middle east adventures impacted the price of oil and it began its precipitous climb culminating in a price of $145/barrel in mid-2008. Americans were feeling a lot less secure and moved back to within their own borders especially as the value of their dollar dropped. Those rising fuel prices led to rising BC Ferry fares and in mid-2005 fuel surcharges kicked affecting tourism and the cost of living on the SC.

In mid-2006, US Home prices peaked and then crashed and the world banking system teetered on the edge of the abyss as all those packaged sub-prime mortgages circulated throughout the world. By late 2007, the US was in recession and western governments were throwing money into the maw to keep their economies afloat. Canada did that, too; but, we went further - we changed CMHC mortgage rules by upping the amortization period, decreasing the downpayment, extending the insurance to second homes and recreational properties and more, much more. Canada would ride out the economic storm by building, buying, selling and flipping homes. Alas, in small markets on the periphery to major markets, the results created a false sense of security and masked growing weaknesses.

On the Sunshine Coast in 2007 and 2008, developments like Trail Bay Estates, Silverstone at Sechelt, Oracle Heights Phase 2, Georgia Crest Phase 2, Farrington Cove, Whittakers, Pender Harbour Landing were throwing parties but no one was coming. Other developments were put on hold like The Trails and others went into foreclosure like Silverback at Porpoise Bay. The Sunshine Coast real estate boom was over; but, the strange thing is prices kept rising (sounds familiar doesn’t it?) with the Benchmark price actually peaking in July, 2010.

Here now is the data from the tables above put into chart form. The first chart cover 2002 - 2007 and you can see the ‘% Sales to List’ ratio (green) is for the most part keeping above the 60% line. In the next chart, years 2008 - 2014, the situation reverses.

[Image: attachment.php?aid=780]

As you can see, the ratio is actually dropping further over 2012 and 2013 and now into 2014. Why? Here are my thoughts: all those who bought property as ‘investments’ prior to 2005 are trying to cash out. Now, couple that with those entering their late 60s and early 70s who want to pull the equity out of their homes. Then, add in those who moved to the coast for construction jobs and who bought into the dream and took on big mortgages but who now can’t find work and have to sell and move. What do was have? We have trouble that starts with “t” and rhymes with “p” that stands for pooped.

Yes, me thinks we’re pooped and I bet I’m not the only one thinking that. How about asking the developers of The Wharf, The Parkland, The Mews on Gerussi Lane, Soames Place, Blue Heron Village and all those who cleared land, put in services and paved subdivision roads up there in Pender Harbour and elsewhere who are now watching the alders grow and Scottish broom take over on their once cleared lots. Yep, pooped.

And, ask the owners in developments like Wakefield Beach who have lost one to two hundred thousand or more as their duplexes and townhomes drop in value. Yep, pooped. Or, ask the owners of million dollar plus properties who can’t find buyers; or, ask the owners who bought homes above $500,000, want to sell and can’t find buyers. Yep, pooped.

As a last word, I hope anyone who doesn’t agree with my interpretation of this data will join the forum and point out the errors of my ways. This invitation includes Sunshine Coast real estate agents who should be far more an expert than I at making sense of these numbers. The same holds true for anyone who agrees with this post, but has more insight to offer. Everyone is welcome.


Attached Files Thumbnail(s)
           
Reply
03-08-2014, 08:21 AM, (This post was last modified: 03-14-2014, 07:40 AM by Skook.)
#2
RE: Sunshine Coast Real Estate: A Seller's or Buyer's Market?
Skook
Another award-nominated, if not award-winning, presentation! Thanks for what must have been a tremendously time-consuming bit of research, formulation and writing.
While reading this, for some reason I likened your efforts to those of Micky in 'The Sorcerers Apprentice.' I could hear the music from Fantasia playing in the background as you brought on all those buckets of facts, figures and charts, until..............well, to say we’re now flooded with information would be an understatement!
Well done.
You deserve another gold star for your work on clarifying what the REBGV ‘Sales-to-Listings’ ratio really means in a particular market like the Sunshiny Coast.
RFM
Reply
03-09-2014, 01:00 PM, (This post was last modified: 03-14-2014, 07:40 AM by Skook.)
#3
RE: Sunshine Coast Real Estate: A Seller's or Buyer's Market?
Last night, I was thinking about those huge charts in my first post. It is very difficult to make good looking charts with that much data and I really dislike messy and, to me, those charts are messy.

My thought was why not see what the data would look like on yearly basis rather than monthly. Each month the REBV offers a running total on all those stats, so I headed back and grabbed the year-to-date figures in each December’s stat package. Since the Board always compares data to the year before, I was able to get the figures for 2000.

Of course, there is always the fear in the back of your mind that the result may somehow be different from what you initially thought; but, I am not going about this to stroke my ego and if the result means “eating crow” so be it. However, I believe the results in the chart below put that fear to rest.

The data is in the table to the left with S=Detached Sales, L=New Detached Listings, and S:L=Sales to Listings Ratio. In the resulting chart, I did something different; I lowered the “Seller’s Market Bar” to 55% based on the explanation in REBGV quote in my first post:

Quote: - a ratio of three sales for five listings means we are in a seller's market (also known as a ratio of 55 – 60%).

When you view the result of lowering “the bar”, I think you have to agree with me that doing so makes very little difference to the overall picture.

[Image: attachment.php?aid=781]

So, the chart shows that a “Seller’s” market on the Sunshine Coast existed for six years (2001-2007) and then the party ended as sales (demand) declined and listings (supply) increased. Since 2007, the ‘Sales to Listings’ ratio has except for 2009 been declining albeit gradually and looks poised to cross the 35% bar this year into a definitive “Buyer’s” market. The million dollar question is - will it?

SC real estate agent Kenan MacKenzie and his fellow agents believe the tide is turning and he says so in his January and February ‘Real Estate Reflections’ which I have posted in my ‘2014 Sunshine Coast Monthly Sales Stats’ thread. In his February piece, he writes:

Quote:The feedback I am getting from the agents is they are working with more buyers than the last few years.

Well, my thought is enquirers aren’t buyers until they have signed the dotted line and the home is sold. The only way for the Sales to Listing ratio to reverse its current path is for sales to exceed the pace of new listings coming on the market. If those individuals currently checking out the SC market feel prices have the potential to drop further and hold off then that reversal isn’t going to happen - at least this year. If interest rates begin to rise this year and they could since inflation figures look poised to jump, then we could begin to see mortgage rates rise once again and that would affect sales. However, these factors might be mitigated if sellers are willing to cross that psychological barrier of selling below assessment value and accepting the fact the only way to move their property is to accept a loss and a substantial one at that. (I recommend RFM's post : 'Pricing Property in a Declining Market'.)

2014 will definitely be an interesting year on the Sunshine Coast.

******************************

In the REBGV quote above in my first post, the Board states:

Quote:A seller’s market is when interest rates are low so there are many qualified buyers and not many homes for sale.

So, low interest rates + low inventory = Seller’s market. Well, the SC inventory is rising and according to real agent Kenan MacKenzie’s total active single detached listings reached 614 at end of February. What about interest rates? The table below shows the Bank Rate and the rate for what the Bank of Canada calls a “Conventional 5Yr Mortgage” for the years 2000-2014. I used the January 1st figures for each year. As of the March 5, 2014, the rate for the Conventional 5Yr Mortgage had dropped to 4.99%. Do you think interest rates will drop further to offset the Sunshine Coast's rising inventory? In your dreams. Will sellers pull their properties off the market to drop inventory? I doubt it.

[Image: attachment.php?aid=782]


.pdf   BoC Historical Bank Rate 1935+.pdf (Size: 15.22 KB / Downloads: 189)

.pdf   BoC Historical 5yr Mortgage rates 1951+.pdf (Size: 14.21 KB / Downloads: 200)

******************************

Again, I encourage readers to post to this thread if they have any thoughts on what I have presented here or if they have their own predictions on where the SC real market is heading - will it be a Seller’s or Buyer’s market in 2014?


Attached Files Thumbnail(s)
       
Reply
03-09-2014, 07:33 PM, (This post was last modified: 03-14-2014, 07:41 AM by Skook.)
#4
RE: Sunshine Coast Real Estate: A Seller's or Buyer's Market?
I seem to have inadvertently timed my visit to the Bank of Canada website rather well. That drop to 4.99% in the Conventional 5-Yr mortgage is apparently big news and word is just getting out now.

I've just visited CanadianMortgageTrends.com and the site is showing a yesterday tweet from RateSpy.com (its sister site) which reads:

"The benchmark qualifying rate hits a record low. What it means to you, the mortgagor" and here is the link to RateSpy's news page.
Reply
03-09-2014, 07:41 PM, (This post was last modified: 03-14-2014, 07:41 AM by Skook.)
#5
RE: Sunshine Coast Real Estate: A Seller's or Buyer's Market?
Re: Inventory numbers.
Impossible to quantify without full access to MLS historical data, but the properties have been listed over and over but not sold and are now not currently listed can pretty much be counted as current inventory. You can bet that if a realtor called the owner and said he had a client interested it would be listed the very next day and then touted as "Sold in one day!"
Skook: You have been tracking the listings closely, could you untangle the total unique listed (each address counted once only) and not sold over the past few years? That is, of course, "pent up supply", and would be a very interesting number to derive a ratio to the sold with.
How about the "Million Dollar Babies"? Last year I think you said listings peaked at 96 properties over 1 million, and 15 sold in 2013. How many unique addresses listed over the year? That is the real inventory.
Reply
03-09-2014, 09:34 PM, (This post was last modified: 03-14-2014, 07:42 AM by Skook.)
#6
RE: Sunshine Coast Real Estate: A Seller's or Buyer's Market?
Alexcanuck, I keep track of listings in the broadest sense only - the total number. I don’t keep track of unique addresses as that would be one herculean task. I remember the concept of “pent up supply” being broached at Vancouver Condo Info when they used to talk about such RE things and my eyes clouded over…LOL. I think that was the issue raised at VCI - how could you obtain that info and I don’t believe anyone had the answer.

By checking Gary Little’s real estate map for daily listings over this past year I’m getting to recognize properties coming back again and again; but I have no inclination to keep track of them. No, I am not that enamoured with SC real estate to undertake that tally.

That being said, if you are interested in such a task for the SC, there are two SC Realtor sites that put out a weekly market report. The first is Sandy Bellamy; however I just checked her site and I see she has only data back to September 4, 2013. The other site is Joni & Gail and you can get all their 2013/2014 reports here. The reports are usually up on site by Friday or Saturday, but sometimes it's later. They give info on New Listings, Price Changes and Sold Properties.

Coupling those reports with the listings that are up on Little's map might give you the answer to that 'pent up supply'. (Note: Little does say in his site: "Some properties may be missing: those listed with brokerages that do not allow me to include any of their listings on the map and those whose owners do not want their properties advertised on the Internet"). One thing you won't find from Little or those reports are the "exclusives" that aren't listed on MLS, but appear in the Sunshine Coast Real Estate Guide. They are part of that "pent up supply", too, are they not?
Reply


Possibly Related Threads...
Thread Author Replies Views Last Post
  At last, new posts on Real Estate blog... Skook 7 932 08-03-2018, 10:04 AM
Last Post: Skook
  2016 Sunshine Coast & Bowen Island Real Estate Sales Stats Skook 13 9,013 10-31-2016, 08:44 AM
Last Post: Skook
  2015 Sunshine Coast Monthly Sales Stats Skook 15 20,740 01-17-2016, 02:59 PM
Last Post: Jay Kay
  2015 Sunshine Coast Land Sales Skook 5 9,517 12-04-2015, 11:53 AM
Last Post: Skook
  2015 Sunshine Coast “$mill+” Property Sales Skook 5 9,823 12-04-2015, 10:59 AM
Last Post: Skook
  Sunshine Coast - is the real estate market shifting? Plelt 3 7,775 09-12-2015, 09:04 AM
Last Post: Plelt
  BC Ferries & the Sunshine Coast: **Prices subject to change without notice** Skook 12 29,807 06-19-2015, 06:07 PM
Last Post: RFM
  Mayne Island Nightmare: Selling rec property in a collapsing market. Skook 28 52,771 05-30-2015, 08:40 AM
Last Post: alexcanuck2.0
  Sunshine Coast Price Drop: How low will they go? Skook 17 27,811 04-17-2015, 10:34 AM
Last Post: Skook
  Sunshine Coast Realtor© Marketing...you say what! Skook 5 8,650 04-08-2015, 11:07 AM
Last Post: Skook

Forum Jump:


Users browsing this thread: 1 Guest(s)

Contact Us | Vancouver Peak | Return to Top | | Lite (Archive) Mode | RSS Syndication