An article on Saturday Feb 6 in the Globe and Mail caught attention across the country. Kathy Tomlinson found records of hundreds of real estate agents and speculators that have made significant profit by flipping Vancouver-area homes, by finding buyers willing to pay more for properties before deals close.
The crux of the issue is that the technique used to facilitate such flips are completely legal. The graphic below explains how a particular home can be sold 3X before the deal actually closes.
When the topic of real estate comes up with people I meet, it is widely thought that spring is the best time to buy. The theory is that more listings will come on the market in the spring, and you won’t be fighting over the scraps that are left over by the winter.
It’s undeniably true that the spring brings more listings, as we can see by looking at the last 5 years of data from the Greater Vancouver Real Estate Board.
Sure enough, inventory usually increases by some 70% from the beginning of the new year to the peak in June. So the widely known theory proves to be true. If you’re a buyer, you will have more to choose from as the dreary Vancouver weather improves.
But does more inventory actually mean the market will be more relaxed? Well looking back at the past 5 years, the answer is no, and in fact quite the opposite is the case. January is usually when the market is slowest. There isn’t much inventory but there are even fewer sales, so the months of inventory reach a high point for the year. Every month after that rapidly shows the market getting more active, and tilted more towards sellers than buyers.
On average, the market drops from 8 months of inventory in January to only 5 in the spring. In other words, it goes from the high end of a balanced market to the edge of a sellers market. So unless this year is an exception the market should heat up even further in the coming months. And given the absolute insanity of this past January, that is not going to be good for those looking to buy. Spring will bring more choice but probably even more competition.
All this madness is not going unnoticed by the provincial government. The finance minister is promising a “double-barrelled” response to overheated housing markets in the budget coming February 16th. That is likely to come in the form of increased property transfer tax, because the best kind of crisis is one that can serve as an excuse for more taxes. And I’m sure that the people buying those $2.5 million dollar Vancouver tear downs will suddenly back off at the prospect of an extra couple bills in tax.
The law of supply and demand certainly applies to Vancouver’s residential housing market.
Today it was announced the average home price in Vancouver hit $1.82-million. This is attributed to the critically low amount of available inventory.
The total number of properties, listed for sale on the REBGV MLS system in January was 6,635, a 38.6% decline compared to January 2015 when 10,811 homes were listed.
House Hunt Vancouver created the MOI vs. SFH Median Price graph below. We are currently sitting in a RED HOT seller’s market with about 2.0 months of inventory in Jan 2016. This continues to rapidly escalate the median home price to over $1.3M for Greater Vancouver. Think of the red line as the supply function, and green line as demand function.
Contributing to ultra-low number of single family homes for sale, is the rapid increase of sales. Every month of 2015 experienced record setting number of transactions since 2010.
Do you think property owners are strategically holding out on the market, restricting supply?