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Van Island Real Estate: A Seller’s or Buyer’s Market?
03-17-2014, 11:09 AM, (This post was last modified: 03-17-2014, 11:13 AM by Skook.)
#1
Van Island Real Estate: A Seller’s or Buyer’s Market?
Every month in my VIREB stats post, I include a “Market Statistics” table. This table which covers all property types is not included in the monthly stats package that you can download from the VIREB website. However, it is included in a stats package sent to Realty offices and Realtors. Some of made that package available to the public on their websites and I give links to two in my Jan/Feb 2014 stats post.

My table is a simplified version of the VIREB table; however, I do include Units Listed, Units Reported Sold, Sell/List Ratio, Average Sell Price/Unit, and Active Listings. It’s the “Sell/List” that has prompted this post.

This ratio is made available to anyone who downloads the REBGV monthly stats package. It is found on the ‘MLS Listings Facts’ page and is referred to as ‘% Sales to Listings’ and last week I decided that maybe it was time to find out what this meant. I nosed around the REBGV website and looking for an explanation and found it on the FAQ page. The question posed was “What’s the difference between a buyer’s and seller’s market?” and here is the Board’s answer:

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%).

So, I proceeded to chart the % Sales to Listing data for the Sunshine Coast and you can see the result in my ‘Sunshine Coast Real Estate: A Seller's or Buyer's Market?’ thread. I have done the same for the VIREB market and here are the results.

The table below for single family home (SFH) shows the monthly sales, new listings and sales-to-listing ratio back to 2010 - the year Van Island real estate tanked following the 2009 stock market meltdown. Now, as you look at the table keep in mind what the REBGV said - that a sale to list ratio equal or greater that 55%-60% is a “Seller’s” market and less than 35% is a “Buyer’s” market. There aren’t many months you would classify as a definitive Seller’s market, are there. Those that do make the grade have one thing in common: a low number of new listings relative to sales. The month with the highest ratio was this past December (87%) and the number of new listings is almost equal to the number of sales. In other words, supply almost equalled demand.

[Image: attachment.php?aid=802]

The chart below graphs that sales-to-list ratio and you can see that most of the months occupy the “no man’s land” between 35% and 55% where you could say the glass is either half empty or half full depending on whether or not you are an optimist.

[Image: attachment.php?aid=803]

A much more interesting chart follows. I plotted the yearly sales, listings and sale-to-list ratios back to 2007. This was the year following the 2006 US housing crash which led to the banking/stock market crisis as all those bundled sub-prime mortgages circulating the globe came to light.

In this chart, you will notice that prior to 2007 we definitely had a “Seller’s” market. It inched close in 2009 but fell back again until last year when the ratio rose to 52%.

[Image: attachment.php?aid=804]

The million dollar question is, “What will happen in 2014?”

To date, the VIREB area has avoided slipping into a true Buyer’s market, but could it finally cross back into a Seller’s market? The image below shows the single family home data from February’s Market Statistics table. Jan 2014 illustrates how critical that relationship is between new listings and sales. January’s new listings rose sharply compared to December, but because sales remained virtually the same the ratio dropped from 87% to 33%. In February, more listing were added, however sales also increased. The pattern has to be maintained otherwise it could be another year in no-man’s land.

[Image: attachment.php?aid=805]

This month, there are signs in other markets that sales could dip to levels not seen before in March stats. I have posted about the Sunshine Coast March sales to date here. On a Vancouver real estate blog, VancouverCondoInfo.com, commentators are noticing poor sales results, too, in more than a few lower mainland markets and many of their posts from the weekend are worth a read (see #31, #37, #44). We will have to see how the rest of the month unfolds and whether March proves a harbinger of things to come.

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

I prepared my post above yesterday and today CREA announced it is revising its 2014 sales forecast downwards. Back in December, it projected a 3.7% increase but now it's lowered the mark to 1.3%. Why? According to the Globe and Mail story, “The Canadian Real Estate Association noted that 2014 has got off to a slower start than most years.”


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