experts: real estate column Monday, May 14, 2012

When cycles are acceptable and when not

The biggest problem with cycles is when they get in the way of what we want to achieve now.

By Alan  Skinner

The biggest problem with cycles is when they get in the way of what we want to achieve now. Yes, they can be very inconvenient. The simple truth embodied in this month's headline is that up-cycles are great when we own property or are in the market to dispose of same and down-cycles are great when we don't own property and are of a mind to acquire some. Reverse the sentiment (not great/rotten) when the "up" or "down" do not coincide with our present desire/position. Yes, we are into a higher supply/ lower demand phase which many believe we will see more of before we see the brakes being applied and the cycle starting to go the other way.

It never ceases to surprise one that the inevitability of cycles is accepted by the majority when these are in the ascendant phase but once we reach the descendant phase, the "it's all over" and "it'll never improve" talk outweighs the rational. This is seen in its most extreme form with the highly emotive and tantalizingly newsworthy terms which contain the word "bubble". Those most affected by a down-cycle are those unable to sell their properties and need to and, yes, another subgroup, called real estate agents. Not as much sympathy is extended to this latter group ;) .

This specific supply/demand imbalance manifests itself in a (significant?) shrinkage in the number of properties that sell. When, say, only 1 in 10 homes is selling (read sales for the period divided by number of homes for sale i.e. inventory) then 90% of those wanting to sell are disappointed. Consider too the shrinkage in the "number of sales" pie. If that drops to, say, one half of the sales of a former period (month, or heaven forbid, year) this could likely be somewhat detrimental to the income of the, largely commissioned, real estate sales force. Yes, the unhappy will, understandably, "beweep" their situation and seek to ascertain, what or whom, is to blame. Sadly, but not surprisingly, there is another group adding fuel to the argument (and showing their often unconcealed delight) and that is the group who are not home owners but wannabe acquisitors, impending or at some future time. Their mantra is 'drop, drop, drop you prices'. Fear not, gentle reader, this is not the 'dark side' but merely a normal part of the supply/demand and acquire/dispose aspects of home ownership. Yes, prices will inflate and yes, prices will deflate and there is very little that we (individually) can do about it. We can choose not to buy or we can choose not to sell. We can choose to rent or we can choose to relocate.

Again, our own North Shore results. North Van detached homes sold are down 'year to date' by 5% from this time last year, attached (t/hses) sold down 19% and apartments up 1% from 2011. Detached - average price is 8% higher than 2011 and inventory Apr 30th, 2012 down 2% from 2011. Average prices up 6% (t/hses) and up 5% (apts). Inventory (t/hses) up 17% from Apr 30th, 2011 and (apt) up 12% from 2011. N/Van overall inventory at Apr 30th, 2012 is up 7% over 2011 and all categories in N/Van, down 6% in total sales '12 vs. '11.

In West Van, detached number of sales to date 2012 is down by 37% from last year. Average price up by 13% and inventory Apr 30th, 2012 up 23% from last year. On the condo side - sales of attached (t/hses) are up, at 32 vs. 23 units; average price is now 23% higher. Active listings from Apr 30th, 2011(45 vs. 31). Apartments sold are down from 2011 (83 vs. 64), with average price 8% lower than' 11 (remember the small sample size) and active listings up 16% from Apr 30th, 2011(115 vs. 99). Overall 23% higher inventory with softer demand evident particularly detached properties. Some 32% fewer units sold YTD vs. 2011.

Again, visit my website to see and "hear" the new developments. I continue my commitment to keep you... www.OnTopOfTheMarket.ca - the "go to" site for North Shore Real Estate analysis and jumping-off point for FULL market listing information.

To join those wishing to get the e-mail version of this "update" - send a request now to alanskinner@shaw.ca and you'll be assured receipt; phone me at (604) 988-7368 or visit www.OnTopOfTheMarket.ca




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Recent Articles by this columnist:

Keeping Realtors Honest
Tuesday, August 12, 2014


How well do we stack up?
Tuesday, July 29, 2014


Resistance to change and compliance delay
Wednesday, June 04, 2014


Of urban planning and municipal wisdom
Thursday, April 17, 2014


Yes, it's official - demand is rising
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All articles by Alan  Skinner

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