Weekly Market Blog

Coquitlam, Port Moody and Port Coquitlam May 2017 Market Report

One thing is for certain on the eve of the 2017 BC provincial election, the provincial government has very little control over the price of real estate. At this point in time, the media has very little idea of what’s happening in the market, which tells me that coverage of the “housing crisis” and discussion surrounding affordability of housing can largely be ignored. If the media can’t even be aware of a red hot market surge occurring under their noses, what good are they? All the editorializing and hot air being put out by media pundits really doesn’t amount to much if they don’t report on this hot market.

This is what has occurred since January 2017: The attached market has continued to be strongly in sellers territory in Coquitlam, Port Coquitlam and Port Moody. The all important ratio of sales to active listings went from “strong” in January and February, to hyper speed in March and April. In both those months, demand outsold supply causing significant price jumps. When listing an apartment or townhouse pretty much anywhere in the Tri City, expect multiple offers and crazy sale prices.

The detached market, which slowed down significantly after the August 2016 15% foreign buyers tax, suddenly woke up in March. Sales to active listings ratios doubled from February to April even while inventories climbed. How long will this last? One can only speculate. A change in government on May 9th will have an effect as buyers most likely take a wait and see approach as a hedge against possible policy changes listings.

Look For a Busy Spring Real Estate Market!

This past weekend I wrote an offer for my buyer client on an apartment in near Coquitlam Centre mall. There are a number of new or newer buildings in the area. This particular apartment had been on the market for about 6 weeks. My buyer fell in love with it and after a 2nd look at it, decided to write an offer. My client is a 1st time buyer. Because of that there was plenty of ground to cover, i.e., how do things work?, what normally happens when…? etc.. To make matters a bit more complicated, the listing realtor was very inexperienced. I had to explain a lot of procedures to him, which wasn’t a problem really. At any rate, after submitting my offer, I was informed that 2 more offers were written and another 2 were possibly being written. What excitement! Needless to say, my 1st time buyer was taken aback. After sitting idle for 6 weeks, how could this property suddenly spring to life. The answer is that holidays and snow have hampered the market over the past few weeks and a backlog of buying activity has been created. That backlog is now playing out in the attached market certainly and I think the detached market is should perk up quickly too. Look for a busy Spring real estate market in Coquitlam, Port Moody and Port Coquitlam.

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.

November 2nd, 2016 Market Update

Of course, everything is dependent on supply and demand, but falling prices are triggered by sellers who “have to sell”. When demand slackens, like it’s doing right now, the market tends to get a bit flooded with product. Out of the many hundreds of sellers, a few can be categorized as “have to sell”, while others are just testing or don’t “have to sell”. As time wears on, buyers have more selection and don’t feel pressure to act. This causes buyers to be less willing to commit, even when they find a great property. Sellers who “have to sell”, see this happening and will react in the only timely way they can, they will reduce their price.
Examples of sellers that “have to sell” are foreclosures, estate sales (perhaps), sellers that have bought already, sellers that are especially motivated to make a change in their home and sellers that just need the cash. Out of the hundreds of sellers on the market, I’d say 25% could be motivated “have to sell” sellers.
So, when demand falls and supply increases, sellers that have to sell must go to the market. They must price their homes to entice reluctant buyers to commit. This will happen over and over again until the market gets into a more balanced situation. It’s happening right now in this current market cycle, it has to. Prices are down from their peak by about 15% in Coquitlam, Port Coquitlam and Port Moody. Its up to buyers as a collective whole to decide how far prices fall. When the collective whole feels that homes are a good deal, they will start to buy again.
This current downturn in demand is not being caused by typical factors like rising interest rates or falling wages. It’s being caused by general buyer sentiment. In other words, it’s a crisis of confidence. That tells me that buyers will return to the market in larger numbers when prices have fallen to a point where they seem like a good deal. That sounds simplistic I know, but it’s how it is.

October stats report

Of course, everything is dependent on supply and demand, but falling prices are triggered by sellers “have to sell”. When demand slackens, like it’s doing right now, the market tends to get a bit flooded with product. Out of the many hundreds of seller, a few can be categorized as “have to sell”, while others are just testing or don’t “have to sell”. As time wears on, buyers have more selection and don’t feel pressure to act. This causes buyers to be less willing to commit, even when they find a great property. Sellers that “have to sell”, see this happening and will react in the only timely way they can. They will reduce their price.
Examples of sellers that “have to sell” are foreclosures, estate sales (perhaps), sellers that have bought already, sellers that are especially motivated to make a change in their home and sellers that just need the cash. Out of the hundreds of sellers on the market, I’d say 25% could be motivated “have to sell” sellers.
So, when demand falls and supply increases, sellers that have to sell must go to the market. They must price their homes to entice reluctant buyers to commit. This will happen over and over again until the market gets into a more balanced situation. It’s happening right now in this current market cycle, it has to. Prices are down from their peak by about 15% in Coquitlam, Port Coquitlam and Port Moody. It’s up to buyers as a collective whole as to how far prices fall. When the collective whole feels that homes are a good deal, they will start to buy again. 
This current downturn in demand is not being caused by typical factors like rising interest rates or falling wages. It’s being caused by general buyer sentiment. In other words, it’s a crisis of confidence. What that tells me is that buyers will return to the market in larger numbers when prices have fallen to a point where they seem like a good deal. That sounds simplistic I know but it’s how it is.

June to August 2016 Stats Review

You may have heard recent media coverage concerning our local real estate market. In fact, the media has never been so interested in home sales stats. When the stats were published for August 2016, the pundits were all over the numbers. Unfortunately, they didn’t delve too deeply. In fact, most observers in the media missed the real point. I’d like to point out what the numbers really say.

Here are the highlights. First, the market for attached properties (townhomes and condos) was very strong in August. In most metro Vancouver markets, sales of attached homes remained very strong while inventory barely moved upwards. As a result, multiple offers on well priced attached homes continues to be a common occurrence. On the other hand, the detached market saw a dramatic move downwards. Sales of detached homes continued their early summer decline, while the inventory climbed significantly in all metro Vancouver markets. In fact, the all important “sales to active listings ratio” (available listings, divided by sales) for detached homes in places like Burnaby and Coquitlam has slipped from 62% and 90% respectively in February to 10% and 17% in August. The 15% foreign buyer tax announced in late July has had the effect of an ice bucket challenge with buyers busy moving to the sidelines to assess what the future may hold for prices. My expectation is for buyers to return in higher numbers in September and October to take advantage of a better selection of listings. In my view, demand for detached homes is still there, it’s just on the sidelines, waiting to see what happens. Its very likely that a portion of that demand, fuelled by offshore money, has gone away.

What about prices of detached homes, though? Will prices fall? Certainly the past 4 months have seen the highs taken out of home values. Moving forward, there will be sellers that have to sell and buyers that have to buy. These buyers and sellers will set the new normal in pricing. So what does that look like? Personally, I’ve been selling real estate long enough to have seen several up cycles and a few down cycles. Down cycles, in which prices fall, are interesting but not fun. Prices fall in these markets because supply outstrips demand by a large margin. As mentioned above, some sellers have to sell. Other sellers will sell if the price is right. The sellers that have to sell, will always have to adjust their asking prices downward in order to attract scarce buyers. This action, moves prices down.

Since I’ve been selling homes, down markets occurred from 1996-2001, 2008 to 2011 and 2012 to 2013. The longest and most painful was probably 1996-2001. Prices languished at historic lows for several years. I recall selling a home for $250,000 in 1999 that would have sold last April for about $1,750,000.

Sales to Active Listing Ratio June to August 2016

Sales to active listing ratio is the number of active listings for a specific month divided by the number of sales in that month. The sales to active listing ratio shows the “speed” of a market. The hotter the market, the higher the ratio.

screen-shot-2016-09-21-at-11-04-25-am

Have a close look at the above ratios. In all three cities, the detached market has slowed dramatically. In fact while sales have dropped, active listings have risen substantially. As you can see, in the attached market, while ratios have fallen, they are still in the “sellers market” range. In the detached market, the ratios show that in August, the market was balanced, favouring neither sellers nor buyers.

June 2016 Stats review

The latest stats for June 2016 show a slow down in detached sales in Vancouver proper over the past dew months. The most appropriate gauge of market “speed” is the sales to active listings ratio. This ratio shows how many homes that were listed, actually sold in any particular month. It’s a pretty simple ratio. If 300 listings were on the market in a particular month, and 150 listings sold, the ratio is 50%, simple. In theory, anything over 20% is considered a sellers market. To put it in perspective, in the past 24 months, we have seen ratios approaching 100% and in the past 6 months, over 100%. For example, in Port Moody, the attached listings to sales ratio for June 2016 was 137%. This extremely tight market condition creates sharp price increases. In contrast, the detached ratio for Coquitlam in June 2016 was a respectable 54%, nowhere near the 90% it reached in March 2016.

Aside from anecdotal evidence showing market speed, these numbers are the best evidence of how busy things are. Granted, the numbers, published monthly are somewhat stale the moment they come out, they are very useful in determining market trends.

It’s a fairly accepted theory that market speed has traveled in waves outward from the city of Vancouver. The wave hit the Tri city area in December 2015. December is typically the time when active listings are at their lowest point in the year, who wants their house listed for sale over the holidays? So in December, a wave of buying activity hits Coquitlam and Port Moody. Prices are increasing rapidly. In March of 2016, the wave hits Port Coquitlam. Prices in Poco rise sharply. 60 days later the wave hits Maple Ridge. This is more or less how price increases happened in the past 7 months. In June 2016 the ratio in Vancouver East was 33%. Inventory of active listings has been rising over the past 3 months in Vancouver East and sales have been decreasing. Falling ratios in Vancouver East has caused prices there to moderate. So what happens to prices when sales ratios fall? In my opinion, prices fall from their most recent level. So if sales ratios in Vancouver East continue to be at 30%, prices will stay relatively stable but of of their highs. According to my wave theory, slowdowns also travel outwards. This is born out by the fact that Port Coquitlam ratios are down and Maple Ridge numbers are still sky high.

Here is a chart showing ratios for the Tri City area:

Sales to Active Listings Ratios

Screen Shot 2016-07-13 at 4.09.55 PM

The above table shows that the attached market in Port Moody, Coquitlam and Port Coquitlam continues to be very hot. It also shows that the detached market is moderating but still could not be called a balanced market.