Real Estate Prices are Falling: What Should I Do?
I have put together some statistics from the real estate board that I have found pivotal in determining what is going to happen in the market.
Please find attached three graphs: Median Prices, Inventory for Vancouver ’s Westside and the 1977 to present pricing graph for Greater Vancouver. The Inventory graph is one that I have developed and is not available from the Real Estate Board.
“Months of Inventory” 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, 0-6 months of inventory has meant generally upward price pressure for the ensuing six months, 6-8 months of inventory meant a flat market with respect to pricing and over 8 months of inventory has precipitated downward price pressure.
Westside Vancouver Housing Inventories Oct'08
Westside Vancouver Median Prices Oct'08
Average Prices Since 1977
The graphs show a few things:
- Detached homes crossed to above 8 months of inventory in June, attached homes in July and apartments in August.
- Detached homes have continued to increase inventories at a significantly higher rate than attached homes and apartments.
- The median price on detached homes hit its high in February and has been somewhat erratic but generally falling since. Inventory has been steadily rising on attached and apartment homes since February.
- The median price just took a sharp drop on attached homes (townhomes and ½ duplexes) in the last month.
- The 30 year graph shows that it takes about 7-10 years after a down market for prices to get back to the previous high point .
What I expect the Inventory graph to show over the next few months is decreasing price pressure on all home types, but most significantly on detached homes.
More simply put: prices are going down but in a way that is consistent with past market cycles. This will not be anything like the US subprime market meltdown. If you are planning on selling a property in the next 5 years it is likely best to sell immediately to mitigate short term losses. If you are planning to hold your property for the next 7 years or more then all is likely well.