The real estate market is soft, and it's going to get softer. In the last year, average prices have dropped five percent or so, and they'll sink some more, guaranteed. Less certainly, the market will...not plunge American-style but rather drift, sometimes downward, sometimes sideways, and perhaps not for very long. Unless, that is, we fall victim to a certain rogue whale that's already circling and with a mere swing of its tail could sink our real estate dory.
That's a summary of your property report, just in time for house-fishing season. Never before, it should be noted, has the competition been hotter. Not for homes-for reports. On one hand, the bright sunshine and glistening dew of realtors and marketers. On the other, the Cassandras who have gained the upper hand lately, and looking at some of the numbers it's easy to see why. Sales running at only two-thirds the normal pace. Lots of dwelling completions due this year. Historical norms that are way out of whack. The unreasonable chunk of average income that buying a house here requires. Rents that stack up well against buying. Then again, there also exist other, less ominous numbers, some of which will be revealed here for the first time. Also to be unveiled is a magic prediction engine that can be used to peg short-term price trends with astonishing precision. And finally, there is that whale, circling ever nearer.
First, the declining market expected in the next month or few and the sorcerer's trick that predicts it with such confidence. The mystic metric is called months of inventory (MOI), which is the number of homes for sale divided by a given month's sales. When the MOI is neutral-around six or seven-average prices change little. Below six, prices rise. And an MOI in double digits results in lower prices.
The formula works so reliably, it's bizarre. For example, in January there were 13,246 MLS listings and 1,351 sales by members of the Real Estate Board of Greater Vancouver, for an MOI of 9.8-a buyers' market. And sure enough, the board's overall benchmark price fell 0.5 percent. MOI first moved north of eight during the latter half of 2012, so small price drops have been the case for several months now. In spring sales always rise, but so do listings, which means the MOI will likely remain in the high single digits and the average price will continue to ease. As the year goes on, conditions could suddenly change-whether for the better, as happened in early 2009, or for the worse, as in 2008 and 2012. Long before prices respond, anyone willing to make a simple calculation will know. Keep reading...
Around the World in Seven Homes
What does a desirable (but you know, not outrageous) house look like in cities with higher price-to-income ratios? In many cases, you're spending the same for less square footage, a lot less lawn, and a lot more history.