We're hearing lots of talk in the MSM these days about Victoria being a "buyer's market." Of course, as usual, most of the talk doesn't ever tell us what a buyer's market does to real estate prices: instead the talk focuses on the Now: buy now, prices have already dropped and probably won't keep dropping much more, who knows when it will end, if you don't buy now you will have missed the boat and you will kick yourself?
InvestorWords defines a buyer's market as: A market which has more than . Low prices result from this of supply over demand. also called soft market. opposite of seller's market. The emphasis is mine. Here's what it looks like graphically, not using local numbers:
In the real estate statistical world, a buyer's market is usually 6 months of inventory (MOI) or more. Obviously the larger the number beyond six, the more soft the market is and the more price pressure there will be in the market. It is important to remember that price pressure requires time: in many cases, 6 months or more for a home seller to feel considerable pressure to drop their prices.
Contrast that with 4 MOI or less being a seller's market. The lower the MOI number, the more upwards price pressure and the more bidding wars we should see. It should also be noted that in a seller's market, time windows are much shorter. In other words, it takes a lot less time to sell a house, so the momentum of price pressure is much steeper.
It's generally accepted that 4-6 MOI is a neutral or flat market. In this type of market, prices rise very gradually or stay flat.
The MSM is telling us a buyer's market is a first time buyer's market. I'll tell you the statistical recognition of the end of a buyer's market is a first time buyer's market. Downwards price pressure will have exhausted itself by then and while total product may be less (as in less choice) it will still be normal and you will still be able to find a decent place at a price you can afford.
Here's what a buyer's market looks like locally, using local numbers graphed by Roger:
Current MOI for all property types is approaching 10. The sales to new listing ratio was 1:3 in February 2009 (for every home sold, 3 came on the market), clearly no shrinking of inventory, so no sign of shifting momentum away from a buyer's market to a neutral one.
Here's the catch FTBers: we're being told that this buyer's market is a FTBer's market. IT IS NOT YET. At least not in single family homes. A quick, rude, count of my PCS listings (houses priced under $425K with a suite or suite potential, the low-end of the market) had an MOI count of under 5. Inventory is selling very close to asking and usually above assessed value. Unless it's got problems, in which case it's not selling or is being hit hard.
All of the price pressure in the Victoria market is concentrated in SFH price $550K and above and throughout the condo market regardless of product or its location.
If you are in the market for a SFH priced $450K or less, you are not buying in a buyer's market, you are competing for a product with the most demand right now and will likely not get the kinds of deals being "smoked and mirrored" out in the MSM and industry speak right now.
You can afford to be patient. As the $550K SFH that isn't selling starts competing with the product that is selling at $450K, we can expect to see a rise in MOI throughout the FTBer end of the SFH market and then you can re-run the numbers to see which way inventory and sales are heading in order to better time your purchasing decisions.
Further homework: check out CondoHype's piece on buy vs rent and PR math.