The fall trend

Supply and demand ratios in Victoria may be the ultimate indicator of market trends for us watchers. Typically, supply and demand dance in unison throughout the year: spring's foxtrot morphs to the hand jive by the early summer until fall's traditional swing slows into the winter waltz.

But 2008 and 2009 have been anything but typical. After a lacklustre summer and fall of 2008, sales volumes were slow to trot January through March 2009. And then the Bank of Canada got the dance started with party favours not seen for 7 years: ultra-low interest rates.

It's important to provide some historical comparison in order to understand what is happening today. In 2007, between September and December, total listings dropped from just under 3400 to about 2800. In January 2008, total listings began piling up (nearly 2000 more listings than sales over 9 months) into the summer and by September reached nearly 4800, meanwhile sales volumes were plummeting.

Cue 2009, total listings never piled up. For whatever reason, homeowners didn't feel this spring and summer was the time to sell. But buyer's were--and continue to--buy any quality product that comes on the market. Sales to new listings ratios remain tight and total listings have consistently dropped since April, hence the rise in prices. What lies ahead for the remainder of 2009? All signs point to a mirroring of 2007 listings and sales volumes, without the corresponding jump in prices.

To gain further insight, and a from-the-ground industry perspective, I engaged Tim Ayres, Sooke-based REALTOR® in an e-mail question and answer session (answers in italics):

Despite the very high sales volumes, sellers just aren't listing their properties like they did last year. Is this because prospective sellers may be sitting on the sidelines expecting prices to rise again so they'll wait till next year to maximize ROI?

This is a really tough question. I think a lot of it has to do with new construction basically coming to a standstill late last year and early this year. The excess inventory (especially condos/townhouses) seems to have been snapped up with the low interest rates and relatively stable employment in our region. I'm not sure why anyone would be waiting.

If you have a house under $600K in Victoria/Saanich or under $500K in Sooke/west shore, it's selling like hotcakes, and you should definitely strike when the iron is hot. I've got at least three or four buyers I can't find houses for at the moment. Not just first-timers either. I don't think prices will increase too much year over year at the end of it all, especially when you exclude luxury/waterfront properties.

I think that we're reaching that affordability threshold again, when people will start to lose interest, despite the low interest rates. BCREA did a presentation at the board election the other day showing an interesting affordability graph (I will try and find the relevant slide) that would show what I mean.

Typically the fall months have sales declines because of 90 day closings and the holidays, do you see the high volume sales trend continuing through October and November? If so, do you see total listings remaining stable or declining further as we near the end of the year?

My guess is that listings will continue to decline. IMO, if we didn't see listings go up in September, we're not going to see them increase at all this fall. Stay the same or go down.

Obviously low interest rates have brought a lot of buyers into the market. Especially the first timers. Do you see a correlating trend in the move up market? Especially with the older home buyers--the boomers in the last decades of their working lives--are they buying and selling more, less or the same as in previous years?

I really can't comment too much on this one - I haven't been monitoring statistical trends as closely as some. I would guess that with all the equity and real estate market turbulence over the past year that many boomers/near-retirees are staying put until they feel confident about their financial position, especially if the house is paid off. I could be totally out to lunch, though.

Is it safe for me to assume that the largest actor group in the local market then is first time buyers? If that is the case, are sellers selling to buy up in the market or are they selling and leaving town, selling and renting etc?

No, I think there are plenty of upper-end listings selling too, so there must be lots of move-ups too. But I think a large part of the surge is first-time buyers, no doubt. Lots were scared off by prices and rising interest rates, and there is a lot of pent-up demand, and not enough good product out there.

If you look at the bottom end of the market, there are a lot of houses under $450K, but so many of them are junk! They aren't selling. What's selling is the nicer ones that are still reasonably priced - people are willing to pay a little more if they're not getting junky houses. Perhaps this has helped prices appear to have been escalating in that market segment. I have been looking with one couple in the Victoria core area for about 4 months now. You should see the junk that comes on the market and what prices they want. Properties that would have been priced $379K 4-6 months ago are trying for $429K or $439K, it's ridiculous - they won't sell. So naturally, the properly priced homes that are in good shape get snapped up.

I find Tim's responses interesting and appreciate his frankness. His answers confirmed my assumptions moving forward. Until we see sales volumes drop sharply, or listings volumes jump by 25% or so, I don't see any downward price pressure. As long as the sales to new listings ratio stays above 65%, total listing volumes will continue to decline.