This is What a Crisis Looks Like

Steve Saretsky -

House shoppers are showing very few signs of fatigue. The latest data out of Vancouver & Toronto for the month of November suggests the bull market remains fully intact.

Greater Vancouver home sales jumped 11% from last year, the second strongest November on record besides 2015. In case you forgot, the winter of 2015 was sparked by a frenzy of offshore buyers, pushing the market to dizzying heights before ultimately peaking a few months later in the spring of 2016. It feels a lot like that today, with sales up and inventory down a whopping 40% from last years levels. If you thought looking for a detached house last year was tough, well inventory has fallen another 25% since then and currently sits at its lowest levels ever. In other words, bidding wars and high prices. Detached home prices are now up 21% in Greater Vancouver and 36% in the Fraser Valley. There have certainly been better times to buy a house, and today isn’t one of them.

Similar to the last bull market of 2015-2017, a rising tide lifts all boats. When the detached market peaked out in 2016, the condo market ripped in 2017 as buyers bid up what was still cheap (in relative terms). We are now seeing that in the condo space, with sales up 33% and inventory plunging 46%. This is a recipe for disaster. Condo prices are up 11% from last year. On the bright side, at least it’s easier to add inventory to the condo market.

Meanwhile, out east, Greater Toronto home sales set a new record high in November, inching out the previous record high set last year. Adding to the woes of homebuyers, inventory fell a staggering 56% from last year. Yes, this is what a housing crisis looks like. There’s less than a month of inventory for sale which means higher prices. GTA home prices are now up 28% from last year. Prices are rising by tens of thousands a month. In other words, your measly wage increase will do you no good here.

This could get worse before it gets better, we are reaching escape velocity in Canada’s two most expensive cities. I suspect regulators are squirming in their seats, but they’ve often proven slow to react. After all, nobody likes a party pooper.

The bigger this gets, the bigger the risk. But then again, we’ve been hearing that for over a decade. Some day there will be a story on this, until then, keep on dancing.

Three Things I’m Watching:

1. Greater Vancouver single family house inventory has never been this low in November. (Source: REBGV, Steve Saretsky)

2. Greater Toronto home prices are up 28% from last November, city of Toronto prices are up 20%. (Source: Better Dwelling)

3. Fraser Valley detached house prices have gone parabolic, up 36% from last November.  (Source: REBGV)

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The Saretsky Report. December 2022