A detached house in Metro Vancouver took an average of 38 days to sell, according to the official statistics. It may appear that homes are selling in a reasonable span of time – but what the numbers don’t tell us is that many of the properties had been listed previously and returned to the market at a lower price. Some have been relisted at new prices umpteen times, and yet, they appear as new listings.
For example, a newly built house at 296 N. Gamma Ave. in Burnaby’s Capitol Hill was first listed on Oct. 13, 2016, at $2.599-million. The listing expired seven times and reappeared at a lower price until it sold this past January for $1,999,888. The listing agent boasted on his website that the house only took 89 days to sell at the asking price of $1,999,888. He made no mention on his website that the house had been listed and relisted several times, for more than a year, and had come down in price by $600,000.
These “recycled listings,” says David Stroud, chief executive of Mortgage Sandbox, are misleading the public and skewing Multiple Listing Service stats, on which the industry bases its market updates. It puts buyers at a disadvantage because they don’t know how long the property has sat on the market and the degree to which the seller may be motivated to sell.
Skewed data are also failing to give the consumer at large a proper understanding of the housing market, particularly the market for detached houses – which has been undergoing a severe correction since 2016. That market is at a near 30-year low in Vancouver, according to realtor Steve Saretsky. “It’s pretty insane how this hasn’t received any headlines.”
The slowdown started just prior to the introduction of the 15-per-cent foreign-buyers tax in August, 2016. In February this year, the tax rose to 20 per cent as part of the NDP government’s host of measures aimed at cooling the housing market. Other factors have contributed to the slowdown as well, such as the Office of the Superintendent of Financial Institutions’ (OSFI) strict “stress test” rules around qualifying for a mortgage.
Meanwhile, there’s confusion about impact on the market, in large part because data are being manipulated, industry insiders such as Mr. Stroud argue. Mr. Stroud spoke on the issue at B.C. Attorney-General David Eby’s town hall on the province’s new tax measures last month.
He cites monthly stats from the Real Estate Board of Greater Vancouver, which says it currently takes 38 days on average for a detached house to sell, based on the MLS.
“But there’s close to 10 months of supply, which would imply the average days on the market would be much longer,” he says. “But because they are recycling listings, the data consistently paint a prettier picture. They make it sound like [the MLS] is a housing inventory-management system. But realistically, it’s more like a detailed classified listing service. It’s like Craigslist, but on steroids.”
Mr. Stroud says a buyer’s agent could easily alert their client to the sales history of the property. But the problem with the statistics as they’re being presented is the consumer is left with a general impression about the market that is misleading. It could influence their decision as to whether it’s the time to buy and create a sentiment of “fear of missing out” (FOMO).
Years ago, prior to the real estate frenzy, a realtor would promote a price reduction or a change to the property as a way to attract buyers, he says.
“You had switched realtors, or put some paint on it, or did a renovation. The only reason you should be cancelling a listing and relisting in my mind is if something significant has changed.”
The Capitol Hill property is not an isolated example. It is indicative of a common practice by realtors who are trying to sell in a market that has swiftly changed, realtor Ian Watt says. There’s a difference between the true numbers and the numbers that are being released to the public, he says. He subscribes to data provider SnapStats, a subscription service that realtors and others in the industry use for more detailed analysis. It says that recent sales for detached houses on Vancouver’s West Side are down 50 per cent. Detached houses on Vancouver’s east side are down 30 per cent; in New Westminster and West Vancouver, they are down 38 per cent; in North Vancouver, 36 per cent; in Coquitlam, 49 per cent; in Port Coquitlam, 47 per cent; in Port Moody, 50 per cent; in South Surrey, 62 per cent; and in Richmond, 47 per cent. According to SnapStats, municipalities across the region have seen significant drops in detached house sales and condo sales from May, 2017, to May, 2018. Even attached housing, such as condos and townhouses, have seen a drop in sales of mostly 20 per cent to 30 per cent across the region.
“There is a huge correction happening right now – it’s already happened,” Vancouver-based Mr. Watt says. “Anything selling right now is local money, because of the property-transfer tax, the empty-homes tax and the fact people can’t get their money out [of their country]. Anything over $2-million is sitting.”
Aaron Best has been a realtor for 15 years and he says gone are the days when a realtor would list a house on a Monday and have an accepted offer over asking the following Monday.
“People are having to sharpen the pencil and dive into the sales data to find out where the market is. And it will take you a lot longer to sell. I just sold a house in south Burnaby that took 49 days that I would easily have sold in a week a year ago. It took us three offers before we got it sold. It’s a lot more work and a lot more open houses.”
He says it has long been standard practice to relist or “refresh” a property that wasn’t selling after three months or so; you’d take new photos, lower the price and relist it to generate new interest. Otherwise, the property gets stale and it can start attracting low-ball offers or get ignored.
“There tends to be a certain type of buyer who starts sniffing around, so they think maybe your client is desperate now or maybe there’s something wrong with the property. It cuts both ways,” he says.
However, he sees the practice being taken to extremes.
“A lot of the time, they’ll take it off after the first week to make it a fresh listing. I think it has [gotten] more pervasive and it’s being abused.
“It has [gotten] to a point where people are trying to manipulate the data, for whatever reason they have.”
Mr. Saretsky says he’s seen the market for detached houses go soft throughout the region and now, he’s seeing sales for townhouses and two-bedroom condos also decline.
“To me, I still think its pretty early stages, but there’s no question that there’s been a substantial correction in the detached market that hasn’t really been reported.
“Obviously, the [real estate] Board is not going to want to talk about that, so they pick the metrics they want to use. The public is definitely out of the loop and, eventually … people will clue in.”
Mr. Saretsky is compiling his own statistics on the average number of days on market for all property types throughout the region, but he’s looking at a 24-month time line and factoring in all relistings to get an accurate picture.
“The true ‘days on the market’ is way higher,” he says.
There are other tell-tale signs of what’s happening with the market. Property-transfer-tax (PTT) transactions offer a somewhat clearer picture about the market’s general direction because each transaction represents a sale. Buyers pay the tax when they purchase a home. The number of PTT transactions from January, 2017, to January, 2018, for detached houses in the city of Vancouver went up 40 per cent, according to the property taxation branch of the Ministry of Finance, as reported on DataBC.
However, after the new tax measures were introduced by the province in February, the number of PTT transactions rapidly declined. Transactions in Vancouver for March, 2018, went down 27 per cent this year over the previous year. By April, transactions for detached houses in the city for the same period had dropped 12 per cent. Declines were also seen in Burnaby, Richmond and West Vancouver. West Vancouver saw the sharpest rise and fall, going from a 43-per-cent increase in PTT transactions in January to a 53-per-cent drop in April.
The figures offer only a three-month glimpse, says analyst Andy Yan, but they follow the same downward direction as sales data.
Phil Moore, president of the Real Estate Board of Greater Vancouver, says the MLS statistics are a general guide, to be considered alongside other data. Because a seller doesn’t want their listing to get stale, it’s standard to “refresh” a listing with new photos and a new price. Typically, the price is re-evaluated after a property has sat on the market for three months, which is what’s happening.
“I guess it’s not something that is new – if the numbers were skewed in 2018, I think the same practice was happening in 2010,” says Mr. Moore, who has been a realtor since 1989. “I do know that the housing market is very slow and it’s not unusual to have to relist a property in this market.
“Days on the market is just a statistic and it’s the average days on the market. It’s just one of many indicators of what is happening in the market and I think we are trying to balance what the seller wants to do, with the market trend. It’s not intentional,” he says of the skewed number.
All buying agents should tell their clients how many times a property has been relisted as the relationship is a matter of trust, he says. It’s a far different market than it was two years ago.
“You’d list a property, expose it for a week, do an open house on a Saturday and Sunday, and on Tuesday you’d have multiple offers. That was until May or June of 2016. And since the foreign-national tax of [August,] 2016, yes, it’s been slower and properties haven’t been selling, and sellers have been relisting them.”
Also, the OSFI rules made it tougher for average income earners to qualify for mortgages, which affected the detached-housing market.
“The detached-market stats are coming out and they just keep slowing every month,” Mr. Moore says.
Agents would be wise to be upfront with their clients, he says. He says he sold a property recently for $3-million after listing it for a month.
“But I didn’t put it on the flyer that it sold in 30 days because I’m the third realtor. We didn’t sell it in 30 days – it was listed with two other companies and we just happened to be the third one and we had to adjust the price.
“I didn’t want to mislead the public, because then you set the expectations too high for the sellers. It’s a trust factor. And our reputations have been hurt by the actions of a few in the last couple of years, and it’s so much more important for an agent if they want to stand out; they want to be credible and trusted.”
Mr. Best doesn’t attribute the downward shift directly to the provincial tax measures.
“I think that’s overblown,” he says.
The biggest impacts on the market, he believes, are coming from new OSFI rules to qualify for a mortgage and rising interest rates.
“As well, President Xi [Jinping] in China is clamping down on money leaving the country and I think the new agreement between Canada Revenue Agency and the Chinese tax authority will have a chilling effect on the market as well,” Mr. Best says, referring to the agreement to share tax and financial information about foreign property owners, which comes into effect in September.
“I think it’s more outside factors than inside policy.
“As we move ahead, we might start seeing more stories in the media about buyer’s remorse, people who got caught up in the FOMO and bought a house that needed major repairs they weren’t aware of because they didn’t do an inspection because they were caught in multiple offers.
“The sellers were in the driver’s seat for a lot of years. Buyers were having to way overextend themselves and took too many risks. Now, the pendulum is starting to swing back.”
And that’s a good thing, Mr. Best says.
“There was a point where things were getting too out of hand; when you start having your tax-paying citizens not being able to afford the city.”