May 2021 - Vancouver Real Estate Market Update

May 2021 - Vancouver Real Estate Market Update:

Welcome back everyone! Who would have thought we would be approaching the half year point so soon! I feel like yesterday I was writing our January 2021 Market Update. But nonetheless here we are. This month we had the confirmation of what Jay and I had been sniffing out for a while now. The market pace has noticeably slowed.

A special note needs to be made here as we won’t be doing our usual covering of year-over-year market figures. This is purely down to the fact it is not an accurate market predictor right now. May 2020 saw BC in major lockdown territory, vastly different from where we are now (yay!) So because of this, it’s better to look at the latest trends and market conditions as to how they relate to real estate during the pandemic.
Long story short, the market has been VERY active. We’ve been breaking records left, right and centre. Typically seeing extreme levels of buyer demand and not anywhere near enough inventory.

This however seemed a very noticeable change (at least to many Realtors) in May. We started to see the frenzy take a breath. Homes were not sold in days for $200,000 above asking price with 10 offers. Instead we started to see overpriced homes sit on the market, those same homes getting one or two offers, and they would be very realistic to market comparables. The only slight exception is the entry level homes of up to $750,000. These seem to be very busy right now … For now.

Take a look at the graph below, specific to Vancouver Houses:

If you take a look back to March, April and May of 2020. You’ll see we peaked in inventory and sales in March, took a dip in April, and then recovered upwards in May as we lead on into the Summer. Now although Covid was in full force, this is the typical trend in Vancouver for this time of year (Spring Market). It just happens at different scales based on how busy vs. quiet the market is.

Fast forward to this year, and you’ll see we did not get that bounce/recover in May this year. In fact the last couple of months we have been seeing sales steadily decrease. Quite the change in the market when you look at the start of the year when we were breaking all records.
Now the above graph is for Houses on Vancouver’s Westside, but the same trend has followed with East and West Side, for both Detached and Attached homes.

Another key indicator is the Sales-to-active listing ratio. In May we’re sitting at a combined ratio for all housing types of 38.9%. This was 47.9% in April, and 62.4% in March. This is what analysts use to determine market volatility. Rates below 12% suggest downward pressure on pricing, 13-20% suggests a balanced market, and 20%+ suggests upward pressure on pricing. Now we’re clearly still in sellers market territory, but our point is we’re seeing the shift in market conditions, as demonstrated in the decreasing ratio over the last few months.
On top of the natural slow down that was always going to come along, new Stress Test rules come into effect June 1 this year, and Summer is typically a slower time in the market for Vancouver.

So what does that mean for you as a seller? You do not have the benefit of a heightened frenzy market behind you. Pricing needs to be on point, or you run the risk of building days on market and not selling. Don’t forget, it’s not a case of you will sell at a higher price, it will just take longer, it’s you running the risk of not selling at all and just sitting there. Not fun for you or us really.

Buyers - You still have to act diligently. If something is priced well, the market will still pick it up and just because the shift has taken place, does not mean prices are going to come down. In fact, the average price increased 1.5% between April 2020 and May 2020. You will just find you may have more flexibility with subjects on your offers (within reason). As well as possibly competing with fewer buyers on a home. It may still go into multiples, but it’s not a straight 8 multiple offers, subject free and over ask as a starting point.

This is a bit of a different story for the entry level market. You can check out our video on that topic from last week here. Even in this market, it’s just a matter of time before it follows suit.

Remember, the market is always going up, until it isn't …

Thanks for joining us again this week! Feel free to field your questions if you have any, we love answering them. You can also watch the video version on this blog on our YouTube channel. Click here to be taken to the Mcinnes Marketing page.

Until next week,

Jay Mcinnes
T: 604.771.4606

Ben Robinson
T: 604.353.8523