2016 Market: Year in Review

Ok, the wild ride of 2016 is in the rear view mirror. A proper ‘year in review’ would run for pages and pages so I’ll give you a more brief and concise report on the state of the market in 2016 and as well as a prediction of the market is going forward.

Remember, the best way to gauge current market activity is to look at the ’Sales to Active Listings Ratio’. This ratio tells you how many homes sold out of the number actually listed for sale in any month. A ratio higher than 20% is said to be in sellers territory while a ratio under 15% can be said represent a buyers market. While the market was going crazy from December 2015 to May-June 2016, the ratio stood well over 50% in Coquitlam, Port Coquitlam and Port Moody. A ratio as high as that is caused by too many buyers trying to buy too few listings. It may not be crystal clear to anyone either in the business, or trying to buy a property, but the inventory of available homes on MLS has been declining over the past 24 months. In December 2015, a typically slow month in real estate, inventory did what it always does in December, it dropped significantly, to an all time low. As a rule, sellers don’t rush to hit the market in December. Coincidentally, a very large group of buyers came into the market at that same time. It played out like a large wave hitting a very small beach, and the market was overwhelmed. The result, as we all know, was a sharp increase in the price of homes in Metro Vancouver.

In late July, the provincial government decided to step in. It slapped a 15% foreign buyers tax on home purchases in Metro Vancouver. Whether this was good or bad policy I will not make a judgement. I can however, speak to the effect. Almost overnight buyer sentiment turned sour. Buyers that were ‘ready, willing and able’ decided hit the pause button. As you can imagine, this was due mainly to uncertainty and uncertainty is always the enemy of decision making.

Its pretty important to make a critical distinction here. When I say buyers hit the pause button, I mean buyers of detached homes. Buyers of attached homes (apartments and townhomes) did nothing of the sort. In general, the attached market in the Tri City area remained busy and undersupplied. Prices of attached homes have continued to be buoyant despite a general slowdown in the market. The result is a very seldom seen narrowing of the gap between detached homes and attached. For example, An older couple in Central Coquitlam wants to downsize and buy an apartment. In March 2016, that older couple sold their detached home for $1.35M and paid $700,000 for their dream apartment in Port Moody and in the process they pocketed $500,000 after fees and taxes. Nice right? Today, that couple sells their detached home for $1.1M and pays $800,000 for their dream apartment. That nice gap has almost been cut in half. I always say that in real estate, timing is everything.

In order to give a simpler look at the all important ratio, I’ve included a table.
Coquitlam
August
September
October
November
December
  • Detached
17
19
17
17
26
  • Attached
68
47
54
61
60
Port Moody
  • Detached
18
11
22
15
19
  • Attached
91
84
86
43
73
Port Coquitlam
  • Detached
19
20
24
22
33
  • Attached
70
63
56
103
71

These number represent the Sales to Active Listings Ratio. This ratio is a simple calculation of 1) Sales for the month over 2) Active MLS listings in that month.

As you can see, the ratio in attached properties was very high while the ratio in detached homes was very low (compared to the crazy market of December 2015 to May June 2016). What we are seeing in the current market for detached homes is actually a fairly normal market, such as what we were seeing from 2010 to 2013. Prices were fairly stable at that time. My prediction is that detached homes will continue to sell with a ratio of between 15 and 25% meaning that market will stay in balance for the next 3-4 months. The attached market will continue to show strength as well.