Vancouver real estate has everyone scrambling to try and figure out how long prices will grow, and when they’ll start contracting. It’s damn near impossible to know when buyers will be exhausted, but we can look at historical records to see how long it typically takes. It turns out over the last decade, prices went from peak to trough over a fairly consistent pattern.
A Correction Isn’t A Crash
A correction isn’t a crash, it’s a phase of price consolidation where peak pricing balances growth. Generally anything that’s commoditized will experience a correction, due to the fact that buyers use emotion to purchase things. Sometimes prices will experience growth, sometimes they’ll experience negative growth. It doesn’t matter what caused the spike, that’s just what healthy markets do. You can’t predict the future, but you can predict that people will overpay and underpay for commodities.
It Takes Over 2 Years From Peak For Prices To Turn Negative
Over the past decade, Vancouver average sale prices haven’t turned negative for at least 26 months after peak growth. June 2006 experienced a peak growth of 19%, before hitting 0% in September 2008 – 26 months later. The March 2010 peak of 17.28% year over year, hit 0% after July 2012 – 29 months later. It’s not a perfect pattern, but it at least tells us growth doesn’t stop overnight. In fact, it normally lasts for at least two years in Vancouver.
Source: CREA.
Prices peaked most recently in July 2016, when year over year growth was at 32.68%. If the above pattern holds true, this puts us at September 2018 for zero growth. That’s for year over year to hit zero growth – not correct.
Negative Growth Typically Lasts Just Over A Year
Vancouver real estate has experienced two fairly consistent negative growth periods, and they’re a lot shorter than I would have guessed. After the first peak, October 2008 was the first month to hit negative growth. This negative phase lasted until September 2009, for a total of 12 months. The next peak hit negative growth in August 2012. This phase lasted until October 2013, 14 months later. Once again, this isn’t a perfect pattern. It does however give us an idea of how long negative growth phases last, a touch over a year.
Average sale prices can move for a lot of reasons, not always because all types of housing are seeing price declines. A panic shift from first-time buyers to consume more affordable types of units could bring the pricing floor up. This would push the average up, without more expensive homes necessarily increasing in price. The reverse would also be true. In a Hunger Games like scenario where only super rich houses are selling, the average price would skew higher without the need for any low end sales. Next week I’ll segment it by housing type for your data loving pleasure. Oh yeah, and may the odds be ever in your favour.
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