Real Estate Market Update: What Is In A Failed Listing?
I recently was going through some previous blog posts and came across a blog I wrote back in November of 2013 on failed listings. In the fall of 2013, the failed listings were still on the decline, which was good; the less failed listings the stronger the market is. Have a read through the 2013 blog and look at the current graph of failed listings. The market continues to show its strength despite the many influencers (interest rate hikes, mortgage rule changes, government tax policy, and unaffordability talk) that are trying to knock it off its feet.
‘Failed listings—otherwise known as expired, canceled, and/or terminated listings—have a lot to teach investors about the real estate market. These failed listings are properties that do not sell after being exposed to the market due to their location, condition, size, price, and/or the market condition. Most market analyzers spend a great amount of time looking at sales volume, inventory numbers, days on market, absorption rates, HPI (housing price index), median price, and other market statistics to evaluate the market conditions. However, one statistic that is rarely used for tracking the market and its cycles are failed listings.
Failed listings indicate the health of the market, as well as giving insight regarding the specific phase (boom, slump, and recovery) of the real estate cycle for a specific area and time. In Don R. Campbell’s book, Secrets Of The Canadian Real Estate Cycle, Campbell writes about the key drivers—demographics, finance, and emotion—that affect the three phases of the real estate cycle. These drivers are critical in understanding the entry and exit points of each individual phase of the market. Interestingly enough, failed listings—or lack of failed listings—in the marketplace are one of the emotional drivers. Large numbers of failed listings reduce confidence in the market and bring forth an emotionally perceived buyer’s market. On the other hand, a limited number of failed listings drives confidence in the market causing an emotionally charged seller’s market. Charting failed listings over a long period of time provides factual, not emotional, insight into the real market conditions and where the trend of the cycle is heading.
Throughout the last twenty-five years I have been an active investor and realtor in the Fraser Valley. I have seen two full real estate cycles of the market—boom, slump, and recovery. Studying the failed listings count for the Fraser Valley market over the last twenty years, one will quickly understand the entry and exit points of the three individual phases of the cycle. In the years of 1994/1995, the slump phase began for the 90’s. In 1995, the peak of failed listings was recorded at 17,413 by the Fraser Valley Real Estate Board. In 2003, failed listings were recorded at a low number of 6,612 which coincided with the middle boom phase of the 2000’s. But as all markets continue in their cycle of ups and downs, 2008 recorded a high of 18,617 failed listings which sent a factual message that the slump had once again come full circle. The failed listing graph (below) of the Fraser Valley real estate market clearly indicates the highs (slump phase) and the lows (boom) over the last 20 years.
History continues to show that trends in the marketplace repeat themselves. By following and tracking the failed listings, there is tremendous insight into the entry and exit points of each cycle phase. ‘
A quick scan of the April STR numbers (Sell Through Rate) shows a trend of a slower market. Yes, I said slower and slower in this market means less multiple offers! The market continues to have a ton of strength in the strata properties, while the single-family market is still strong but is more price sensitive. Well-priced listings are still selling in 7 days or less. The Vancouver luxury market has lost its luster, with homes sitting for long periods of time and STR numbers in the single digit range.
Fellow investors; know your numbers, stats, and the pulse of the market, then get out there and make some generational wealth. Any questions, feel free to call me.
Personal Real Estate Corporation
604-807-4366 or firstname.lastname@example.org
STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales