Vancouver Real Estate Update - Inflation or Deflation?
The Months of Inventory (MOI) metric for all Westside Vancouver home types fell in November. The Detached MOI now sits at 5.83, Attached at 5.9 and Apartments at 4.74. Average monthly sale prices fell marginally again for Attached homes and Apartments but remained flat for Detached homes in November.
Fewer new listings are the predominant reason for the drop in MOI. This seasonal trend will likely continue for the month of December and possibly January as more people opt to wait until after the holiday season to list their homes for sale. The Months of Inventory numbers have declined over the last two months but they are still relatively high compared to the preceding 12 months. Average sale prices will likely continue to stagnate or trend downwards slowly over the next several months.
One of the questions I've heard of late is whether Vancouverites should expect deflation or inflation moving foward. I've spent a fair amount of time reading articles on the subject and one thing seems clear - there is no consensus. In the short run, many economists argue that the market is betting on deflation as investors shift their capital into US Treasury Bills. It seems that it is only when economists are asked about the long term that inflation is more often seen as the likely outcome though very few appear to believe it would be a "hyperinflation" situation. "Quantatative easing" in the United States and similar actions yet to be full implimented in the European Union are often cited as the prospective cause. Real Estate is often seen as a safe place for wealth in an inflationary market but it should be remembered that highly leveraged real estate can be risky. Interest rates are historically very low at the moment and are more likely than not to stay that way in the short run. But imagine a family taking out a 5 year fixed term $1,000,000 mortgage today at 3.29% for 35 years - what will happen if interest rates are 5.29% or higher at the end of 5 years when the loan needs to be renewed? Prices for most things will be up - will wages rise with inflation? Real Estate can be a safe asset in an inflationary market if you own it outright or have very little debt.
Remember that Months of Inventory” (MOI) is a measure derived from the number of active listings during a given month divided by the number of sales 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 has generally implied upward price pressure for the ensuing six months, 5-8 months of inventory meant a flat market with respect to pricing and over 8 months of inventory has, for the most part, precipitated downward price pressure.
Do not hesitate to call me if you have any questions and please pass this and my contact information along to any friends or family who might benefit from my services.
Vancouver Realtor - Sam Wyatt - 604-722-3734