The sales-to-active-listings ratio is a key indicator of real estate market sentiment. The ratio measures the number of homes listed for sale against the number of sales in a particular month. Like most any transaction, home prices are subject to the forces of supply and demand. The sales-to-active-listings ratio provides a snapshot of these forces at work. In Metro Vancouver, a ratio between 13 percent and 20 percent (or, more correctly, between .13 and .2) indicates supply and demand are in balance. Anything above 20 percent (e.g., 20 homes selling for every 100 listed) is considered a sellers' market, with upward pressure on prices; anything below 12 percent or so is considered a buyers' market. The ratio fluctuates dramatically based on area, type of property, and price points. In the past 6-8 months, for example, we’ve seen the ratio hit over 100 percent for detached homes in some areas.
Demand continues to outstrip supply in the Metro Vancouver housing market. June's sales-to-active-listings ratio of 56 percent (.56) for all of Metro Van is still strongly indicative of a seller's market; however, this is the lowest number since February. Digging into area stats reveals the ratio has moved dramatically in some parts of the Metro area. Following are a couple of random examples. (And I can produce these for any area or sub-area for you; just contact me).
Local residents taking pause
Some of the June decrease in the number of sales to active listings can be attributed to the summer doldrums; perhaps some can be traced to buyer fatigue after our frantic spring market.
Additionally, many local residents have hit the wall in their ability to finance properties with ever-increasing values. Add to this the ever-increasing difficulties in obtaining financing, and one can see how the pool of local resident buyers may be shrinking, at least in the short term. The incessant talk of government intervention, bubbles, and money laundering has no doubt given some local buyers pause as well. I'veseen no indication of any reduction in offshore buyer activity, however. In fact, just the opposite. These buyers continue to be a major factor in the supply-demand balance for any type of property I've been involved with.
A new set of offshore buyers?
The recent Brexit vote may bring with it a new round of demand for Vancouver properties. London has long been perhaps the pre-eminent property market for many of the world's wealthiest individuals. With the ongoing uncertainty of UK business health, many offshore buyers may no doubt seek to store or invest their funds elsewhere. To borrow a term from the stock market, many London properties could be “no-bid” for quite some time. It will certainly be interesting to follow how the UK property market - and the island's financial health in general - fares. Just a few days ago trading was suspended for six of the biggest property funds in the UK due to overwhelming demand for client redemptions. How this may affect our market remains to be seen. Suffice to say, Vancouver at this time is one of top spots world-wide for property investment (or, as some would say, for parking cash).
Summer doldrums, buyer fatigue, new offshore interest, continuing demands for government intervention. Our housing market will no continue as quite a topic of interest through the summer and into the fall.
Want to stay on top of real estate news and views? Like me on Facebook
. (Note: This article was originally published in my July e-newsletter. Drop me a line if you'd like to subscribe.)