Vancouver Real Estate: Of Crystal Balls and Market Bottoms

Loyal readers of this blog (yes, both of you    ) know that I have been rather skeptical of the propaganda distributed by local real estate organizations and pimped out through the Columbian. For most of the past two years, I have doubted their calls for a real estate rally and dismissed the five or six market bottoms they called.  But now, my analysis of the numbers finally says we actually may be on to something.

As you know, I am a fan of the old stock market axiom that numbers don’t lie, people (with agendas) do. So I have been looking to the numbers, not the press releases, to tell us what to expect next.  Real Estate 101 tells us its all about supply and demand, not sound bites and catch-phrases.  In September 2007, right after the National Association of Realtors and the Builders trade group launched their “NOW is the time to buy” ad campaign, I said this:

Sorry, but to the average Jane homebuyer out there, the Association of Realtors and the Builders sitting on loads of inventory are not the greatest, most credible source for, shall we say, unbiased information. They want houses to sell, NOW… But, candidly, it may get worse before it gets better.  Anyone who tells you they know for sure that NOW IS THE TIME to buy… well, I’d say “run Forrest, run”, away, as fast as you can. I’m not going all negative here, but call me a realist.

Of course, as we know, even as they launched that campaign, sales continued to dry up, inventory exploded and prices dropped precipitously. We will give them some credit, maybe they were just a little “early”.

Anyway, as I’ve told anyone who would listen, we are struggling to find a bottom and have been somewhere in the lower part of a “U”-shaped bottom for months now. So as I looked at this month’s market data, my analysis gave me a glimmer of hope. Months of Inventory is at the lowest point since Fall of 2007, and has been reduced by a staggering 44.3% since January alone.  That’s a big number.

As important, March Y/Y Months of Inventory saw the first reduction since August, 2005. Read that again, I’ll wait. It’s been almost four years of continually advancing inventory ratios. That was one of the primary formulas I used when telling my agents in September, 2005 that we were forming a top in the market. Price appreciation continued for several more months, but we ultimately “saw the other side of the mountain” and have lived and breathed the new market realities that eventually developed.

Look, I’m not an economist, I’m using math learned in public schools, and all this is simply my interpretation from an “on the ground” perspective. But, I think we may finally be getting our arms around the inventory issues.  There WILL likely be another (smaller) wave of short-sales and foreclosures, and that will continue to work negatively on values.  Pricing depreciation may continue – albeit much more slowly – for a while, but the bottom in values will follow the bottom in inventory and then we can get back to some semblance of normalcy in the real estate market. Not rocketing appreciating nor plummeting values… a simple, equitable, manageable, sustainable and therefore healthy market.

If this doesn’t come to pass, look for my crystal ball for sale on eBay soon.