The indications of the last four months point to the most serious melt-down in the real estate market in this region since at least the 1960s, I have no access to good data from back then so I can not sure. The volume of sales is dramatically down - not just a bit.
If the last four months are the trend, sales volumes in this region will be comparable to ones in the late 1970s and early 1980s. Though there are some big differences, our population is 50% larger than that era. This means it is REALLY bad out there.
The current supply of units on the market is three times as large as the number of units that will sell in the next three months. For your house to sell, you will have to drop your price dramatically to get it to move, otherwise you are competing with a lot of houses that are also not selling. This assumes no new units come onto the market in the next three months.
Even if the Active Listings were to fall to 2500 (currently about 3700), there would still be more than twice as many units on the market as what will sell.
So why will sales volumes continue to be low? There are a lot of people no longer in the market.
The first group that is out of the market are the people that do not need to move at all. The ones that would be willing to use their equity to move up in the market. The problem is that with the fall in the prices the equity people hold is too small to justify doing this. An average loss of $75 000 in equity in the last year will make it very hard for a lot of people to sell and buy something bigger and better. Until the market is clearly stable, this segment of buying public will be gone.
The second group that is gone from the market are the flippers and speculators. No amount of fixing and sprucing up will increase a price when the market is falling each and every month. Most flippers made money from the rising market and not from the improvements they made to the houses.
The condo market is badly hit by the loss of the speculative buyers being gone as many units were purchased before the building was built. In BC almost no condo developments go ahead unless the building is sold before construction. Speculators and flippers will not be back until it becomes clear that the market is going up by more than 10% a year. This means they will be out of the market for some time.
The third group that is no longer in the market here are the out of town people - Americans and Eastern Canadians. They were never a large part in of themselves as most of them were speculators, but there was a decent set of them boosting the market locally. They are now gone and likely to be gone for at least five years and maybe for ten.
The fourth group that is gone from the market are the first time buyers. They have effectively been out of the market for more than a year already. Back in 2004 to 2006 many first time buyers entered the market out of a panic that otherwise they would not be able to get into the market. In 2007 there were less of them and in 2008 they dried up. First time buyers are the lubrication of the market, without them a crash has to happen. They are the first ones that will return to the market, but only if the prices justify it.
For a 30 year old couple earning a combined gross income of $80 000, they would realistically be looking for a house for $300 000. There is still almost nothing in the market even close to this. When prices come low enough for there to be lot of choice at this level, you will see first time buyers come back into the market.
For the local market to stop falling, you need to see several thousand first time buyers come into the market. This means we need to see the average price drop to around $350 000 or lower. The market will need to fall to the price levels seen in about 2003 or 2004.
We have one more problem in the local market, a lot of first time buyers in the last four years bought condos. For most them the goal was to get on the property ladder and trade up to a house but this will not happen. These people are now trapped in their condos because of their negative equity. The very dramatic drop in condos will effect the bottom of the house market and drive down prices even further.
Some interesting real estate links and some of the better agents:
House Hunt Victoria
Victoria Housing and Real Estate Market Blog
Victoria Stats and Trends