As expected, October 2012 home sales were higher than those in September 2012. But October still came in as one of the worst months in the last 15 years.
Some might cling to that increase as a sign of upcoming market salvation.
Some… but not all.
Richmond Real Estate agent James Wong, who is out with his November 2012 market report makes no bones about his take on that uptick in sales last month:
The sale pace though improved, was not expected to have the momentum to turn the market around. There were some price discounting by motivated sellers, but most home buyers were reluctant to make their purchases.
Wong still see’s dismal conditions in Richmond:
In spite of many homes in Richmond being listed at or below their city assessment values, many of these homes were not selling. Most home buyers prefer to wait and watch how the market will turn out the next few months. Buyers who were making offers, typically make low ball offers on homes they were interested to buy.
Most homes sit on the market, and home sellers are reluctant to make drastic price cuts to sell their homes.
Listings had dropped off gradually over the past 4 months as sellers either took their homes off the market or allowed them to expire.
In fact things continue to be so bad that:
the in-balance in supply and demand is putting pressure on Richmond home sellers to accept or reject offers that are far below their expectations.
And what is the status of that current “in-balance”?
The months-of-inventory improved from 14.09 last month to 12.38 months in October. Comparatively, Richmond has a large over-hang of resale condos competing for buyers with presale new condos under construction.
There are 588 Richmond detached homes for sale at prices over $1,000,000. With average past 3 months sale around 33 homes, there are 17.88 months supply of homes in the market. For detached homes over $1,500,000, there are currently 309 homes for sale. With an average past 3 months sale of 14 homes, this translates into 22.07 months supply of homes.
The in-balance in supply and demand is putting pressure on Richmond home sellers to accept or reject offers that are far below their expectations.
In this report, Wong takes a moment to share with his readers what they should expect of the Richmond housing market for 2013:
With the housing market sentiment dampened, absence of of home buyers and Canadian banks having to follow the new lending rules, 2013 will be a difficult year for home sellers, builders and housing developers. The decline in home prices will likely take many years to play out.
In a market with abundant supply of homes, sellers will lose out. The health of the housing market is best tracked by following the months-of-inventory (MOI) number presented on this site. At current MOI level around 14, it will take some time for the number to improve. This MOI number has to get down from 14 to 10, 8 and then 6 before the market stabilizes.
With the Canadian Government curtailing credit to deflate the real estate bubble, real estate prices can only decline. Unless the Government makes drastic changes to the new lending rules, home prices will continue to decline for some time.
If the housing down cycle from 1995 to 2001 downturn is repeated, we could experience home price decline and slow sales for many years. The market is expected to have persistently high number of homes for sale, and below average buying interest.
Once again we tip our hat to Mr. Wong for his honest, succinct assessment of today’s real estate landscape.
It is a refreshing breath of consistent honesty.
It is refreshing to have a person who , regardless of their profession lays it out as an objective analyst and not act like a delusional salesmen.
I am not an expert in this field, but I do follow it quite diligently, moreso since reading various blogs that appeared and inspired by this current Real Estate mania. Once caught up to speed, on simply realizes this is a bubble not only locally, but globally.
As I stated in a previous post…it is the Buyer who sets the price….the only difference is the Greater Fool. Markets all follow cycles, once the Greater Fool has arrived (ie in theory the last person to pay peak price)…then people start to worry if they will be the Greater Fools, sales stagnate and then the prices drop.
Then the buyers start to wonder..gee if I wait another week …..month….. 6 months I may save another $100,000……..$200,000…etc. For Example: They don’t want to be the person that paid $800,000 for something comparable that will drop to $700,000 in a month. So, they pull themsleves out of the “Greater Fool Pool ” and let someone else make the moves. (Granted there will always be people that can pay cash etc…and don’t have time to wait…they will buy what they like if it becomes available).
“MOI” as defined above is a good indicators. Personally, because this latest market run up was so bizarre, I see all sorts of equilibraically bizarre UNwindings. I mentioned my neighbour who sold…for a higher price than he had previously asked..and the new owners immediately listed it for approx. double the selling price . My neighbour tried to sell for years….would have accepted $900,000…sold for $1.4 Million…and the new owner is actually trying to sell for close to $3 Million. Out to lunch… did not do their homework classic Greater Fool.
Given what one could call is a ” global credit freeze ” and a declining global economy…..we will not see these speculation fueled prices again. A 50% drop in the next few years or even months wouldn’t surprise me. We may see a bit of a rally by some buyers in the Spring who feel prices have bottomed out…that’s their theory. However…I don’t see any fuel to keep the bubble up…now or in the future. We will have large demographic shifts as current owners get older… and unfortunately many have “eaten their young”….the younger buyer pool has been snookered into debt…buying over-priced residences on credit, and may be in such financial straits they will never afford a dwelling…which then collapses prices..its a vicious circle.
We don’t have any more countries to ship our jobs to, like China…and have them return “wealthy” buying up our Real Estate ( NOTE: I will continue that series of posts this week to tie up loose ends). Unlike the 1980’s , this latest boom sucked in far too many people who never should have bought into a mirage.
The only question is How LOOOW can it go ?
Only the future knows for sure, but my guess is we ain’t seen nothing yet.