Vancouver real estate: Low supply behind price increases for detached homes

Vancouver real estate: Low supply behind price increases for detached homes

Detached home sales in greater Vancouver for December were up 70 per cent year-on-year at 1,034, just off the record high of 1,131 in December 2015 when prices were inflating at an unprecedented pace

VANCOUVER, BC - January 4, 2021  - For sale sign in front of 731 W 17th avenue in Vancouver, BC, January 4, 2021. B.C. Assessment updates 2020 valuations, showing big increases for property owners. Sample shows City of Vancouver detached home values up between five and 10 per cent, and more in Surrey.

Photo by Arlen Redekop / Vancouver Sun / The Province (PNG) (story by Derrick Penner) [PNG Merlin Archive]Detached home sales in greater Vancouver for December were up 70 per cent year-on-year at 1,034, just off the record high of 1,131 in December 2015 when prices were inflating at an unprecedented pace. PHOTO BY ARLEN REDEKOP /PNG

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Mayur Arora just sold a detached home in Surrey’s Fraser Heights for $115,000 over the ask price of $1.3 million. The real estate agent showed another in the Sullivan area to 47 people over two days, interest he thinks might net a sale of more than $100,000 over the $1.7 million asking price.

These are not artificially lowered asking prices like the ones some agents set to bring in a flurry of bids, explained Arora. “There are just not many homes.”

Increased borrowing power due to low interest rates is enabling more buyers to trade up and go for properties with more space, he added.

Detached home sales in greater Vancouver for December were up 70 per cent year-on-year at 1,034, just off the record high of 1,131 in December 2015 when prices were inflating at an unprecedented pace, according to Vancouver realtor Steve Saretsky.

Saretsky writes the “best predictor of prices” for detached homes is “months of inventory.’ Prices rise when months of inventory goes below four months and it is now at a paltry 2.7 months.

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Analyst and real estate agent Dane Eitel said one important nuance to see is that in 2015, the inventory of detached homes in Greater Vancouver was 57,308, but there were 17,372 sales. In 2020, the inventory was 50,225 homes, but there were only 10,832 sales, which is down 15 per cent from the 15-year average of 12,748.

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Between 2005 to 2019, the total yearly inventory average was 70, 082. So in 2015, the inventory number was 18 per cent lower than the 15-year average, but in 2020, it was 28 per cent lower.

It means the increase in home values in 2020 was less about sales and demand — and even interest rates, which were also low in 2015 — and more about a scarcity of inventory, said Eitel.

The difference could be important if home prices edge back up to 2016 levels even though “the economy is not recovering nearly as fast as the housing market would indicate.”

The COVID-19 vaccine might ease health concerns for sellers who are currently happy to hold their detached homes. They might be motivated to list their homes and take the gains if prices continue to rise spurred on by low inventory that is so historically low, it will take some time to ease, said Eitel.

The seller of one of a Surrey home recently sold by Arora, for example, is moving to Vernon, where he can permanently work from home. “He’s cashing out.”

Vancouver real estate agent Les Twarog said there are “hot” micro markets for detached homes, such as one for homes under $1.5 million in East Vancouver and another for homes under $2.5 million on the west side, where there are some multiple offers and over ask sales.

But it’s certainly not the boom of 2016, 2017 and 2018 when “you might get $300,000 or $400,000 over ask on a $2 million listing,” he said.

jlee-young@postmedia.com

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