Vancouver real estate: like selling a couch on Craigslist
Chances are, if you’ve got a leather couch that you’re trying to unload on Craigslist and it isn’t selling because there are 20 others in a similar price range, you’d likely drop your asking price since you’ve already purchased a replacement.
If detached homes on Vancouver’s uber-expensive West Side were sofas, well, you’d have almost a thousand to choose from right now. Alas, it’s one thing to dump a $300 couch and quite another to spruce up and sell a $2M property.
Vancouverites are obsessed with real estate – a business writer colleague of mine put it ‘real estate is to Vancouver what oil and gas are to Edmonton and Calgary.’ Since the early 1980s, the mere act of buying the right house at the right time in the right neighbourhood has made many folks in our town rich – on paper, at least.
However, you only make money once you cash out. And it seems that quite a few homeowners in one of Canada’s richest postal codes are trying to do.
Right now, they’re holding their breath and are turning blue.
Realtors like RE/MAX’s Sam Wyatt use a metric called “Months of Inventory” to give an idea of how long it might take to sell a property. Wyatt, a property specialist based in Kerrisdale, recently released his September report. “The Months of Inventory (MOI) metric for Westside Vancouver houses rose for the sixth consecutive month in August. It has risen from 4.39 in February to 13.27 in August. Attached homes rose to 8.15 and apartments rose to over 8.45 months of inventory.”
Months of Inventory (MOI) is a measure derived from the number of active listings during a given month divided by the number of sales in that month. It indicates the theoretical length of time it would take to sell all of the properties on the market if nothing changed. Historically, 0-5 months of inventory generally means rising prices for the next six months, 5-8 months of inventory meant a flat market with respect to pricing, longer than 8 months of inventory has, for the most part, precipitates dropping prices
Wyatt also provides another metric called “listing success ratio” i.e., the number of sales divided by a certain period of time – in this case, from the beginning of 2012.
His report concludes: “The year-to-date listing success ratio for detached homes is only 33 per cent while a year ago this time it was nearly double at 59 per cent. This means that only 33 per cent of listings are actually selling.”
“But,” you protest, “the Vancouver Real Estate Board states that the average West Side detached house price is going up, up, up!” True, again, but Wyatt has an explanation:
“Ironically, the very homes that have brought the average prices up sold for huge discounts off their list prices. Two homes priced at nearly $14,000,000 and $16,000,000 each sold for about $12,000,000.” And everyone knows that the sale of a couple of stratospherically expensive homes during a period of low sales will skew the average upwards.
Wyatt doesn’t see the market picking up until sellers get realistic about their pricing. “If you want to sell, you will need to price below the most recent comparable sales prices and you need to do this from the very beginning of the listing. If you don't do this, your listing will almost certainly stagnate. I have been selling homes over the past few months using this methodology, in a market where most homes are not selling at all, most for over asking or at full price.”
For every sad statistic, though, there’s a story that fuels the rumours and hype about the market. Next week, we’ll talk to a realtor who just sold a house – a lot with a tear-down on it, in reality – for one million dollars over asking price. Which was only $1.8 million to start with.
After all, wouldn’t you love to get $600 for that used couch that you listed for $400?