Housing supply pales in the face of record sales - The Orca

Housing supply pales in the face of record sales

Ryan Berlin

Outlier demand-side activity in the Vancouver Region’s housing market is making it challenging to separate fact from fiction. It seems clear that supply remains constrained against the backdrop of another record month for sales--for now.

Just as smooth seas do not a skilled sailor make, the same can mostly be said for stable markets’ ability to create savvy analysts.

This is not to say that one cannot generate robust, thoughtful, and meaningful insights during non-turbulent times–indeed, it is probably the safest and most reasonable time to produce forecasts, for example–but it is when markets are undergoing unprecedented or unexpected changes that separating the noise from the signal is often most challenging.

Take our current housing market here in the Vancouver Region. Depending on who you ask, the market is either as active as it’s ever been, or it’s already slowing. Even more curious is that each of these perspectives can be rooted in the same set of data points!

As a tangible example of this, consider the 7,795 MLS sales that were tallied in the Vancouver Region in April 2021. Factually, this represented a 1,097-sale decrease from the previous month, equivalent to a 12% decline in sales activity. Chalk one up for the “slow-downers”.

The counterpoint to this perspective is that in April, our region was coming off the heels of the all-time record high in sales in any month ever in March; for there not to have been a month-over-month reduction in sales we would have had to have set another all-time record for sales in April. In any event, April 2021’s sales count was in fact the most in any April in the region’s history (squeaking by April 2016’s 7,624 sales).

Depending on how narrowly one chooses to interpret the sales data, the evidence on the direction of the market can appear mixed. To us, it seems evident that demand remains robust in a historical context, with future tailwinds (migration, job growth, and low interest rates) blowing harder than expected headwinds (rising interest rates and buyer fatigue).

Much ado has also been made about rising supply. Is the market being flooded with listings? The answer is: not really.

Resale inventory was certainly higher in April than in March, by 1,652 listings (12%); additionally, April’s inventory was 2% higher than it was in April 2020. Notably, however, the year-over-year increase is solely attributable to rising detached listings, with townhome and condo listings lower by 16% and 0.8%, respectively, compared to one year ago. Most importantly, inventory is currently 21% lower than the past-decade April average, suggesting that, in the bigger picture, supply remains constrained in the Vancouver Region.

The next few months will be fascinating to monitor. Will demand slow down as the vaccine is more widely deployed and instead of going to open houses more of us are opening our houses to family and friends? Will the economy continue to recover and, if so, how will listings respond?

Rest assured I will be following the data closely.

Ryan Berlin is the Senior Economist with rennie intelligence.


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