2008 certainly was an interesting year for real estate market observers in Vancouver. For nearly 2 years the local market bucked the declining price trends seen in the US and elsewhere. Pundits had proclaimed that the local market was immune or insulated from the turmoil elsewhere. Oh how wrong they were. Benchmark detached home prices in the Greater Vancouver area are now at the same level as they were in June 2006.
This story is really all about supply and demand. There is lots of supply with even more coming and very little demand. Active listings are significantly above previous year's levels so the supply side is not helping those who want higher prices.
One may look to the demand side of the equation for some hope for some price appreciation but monthly sales are at half the level they were during the boom years with no quick fixes in sight.
Consequently, it would take a very long time, 16.4 months to be exact, for the current level of inventory to be sold off at the current rate of sales. This essentially means that the market is completely saturated with product and the only sales to be seen are the deep discounts.
The correlation between months of inventory and price changes is extremely tight with any MOI level above 7 MOI indicating further price declines. At the current level of more than double that, I do not expect rising prices anytime soon.
As mentioned previously, prices are now back at mid-2006 levels and the retreat has only begun. I fully expect inventory to swell in the new year and sales to continue at a lacklustre pace which will put continued and significant negative price pressure on sellers for the next while.
Good luck to everyone.
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