The lower mainland real estate market has once again gone into crazy town. Multiple offers, bidding wars and no-subject offers are once again common place in real estate transactions. The stats this month reflects how hot the market is in Vancouver.
Sales this February is 73.3% higher than last year and 56% higher than last month. This sales figure is 42.8% above the 10-year February average. A major contributing factor is that the supply is not keeping up with demand. Even though there are 26.1% more new listing this February than last, the total number of homes listed is 9.1% lower than last February.
It seems like the millennials are out buying homes while older owners are not selling until the medical crisis is under control. A report by Royal LePage said that 49% of the residents aged 25 to 35 in BC own their own home and 27% of them purchased it since March 2020. This can be a factor in the shortage of supply and one wonders whether the supply will significantly increase once most of the population is vaccinated.
The sales-to-active listings ratio for detached homes is 41.8%, for townhomes is 61.8% and for apartments it is 41.7%. Typically, what is said is that home prices experience downward pressure when the ratio dips below 12% for a sustained period, while upward pressure on prices happen when it surpasses 20% over several months. However, ratios at these level shows an immediate impact on price.
Detached home prices shot up 2.8% from January and is up 13.7% from February 2020. For apartment homes the price was up 2.5% from January and is up only 3% from February 2020, reflecting how apartment is the weakest segment of the market. Townhomes shot up 2.9% from last month and up 7.2% from February 2020.
One person’s overbid becomes the next person’s baseline. With each multiple offer, there are many who loses out and are tempted to overbid next time. This creates an environment where prices can quickly get out of hand. This is why in RBC Economics’ most recent report it warned that the market maybe overheating. But the pros have been wrong before. Below is a graph of what CMHC’s predictions were last year along with what actually happened. The graph is precipitously steep. I can definitely see activity slowing down but it is harder to predict if there will be a retracement of prices.
