Richmond Real Estate Market Report-May 2013

Blog by Arnold Shuchat | June 2nd, 2013

The Seller's Delusion Index-May 2013

As can be seen from the table below, the SDI is calculated as the sum of expired listings in a period plus terminated listings in that period divided by the number of units sold in that same period.  The higher the ratio, the more "out of whack" sellers are with buyers. To put this into perspective, in February 2011 33.8% of all listings were frustrated by a termination or an expiry-roughly 1 in 3.  A similar period in 2013 showed a 535% increase in this frustration index.  At some point, when these statistics show such a large change, I figure that somebody's expectations are out of whack.  Since the customer is always right and the buyers can do whatever they want with their money, I attribute these erroneous expectations to the sellers.  Hence, the term "Seller's Delusion Index". At 1.77 Richmond's SDI for single family homes is still far away from the index number of 2011 (.338).  So why then do sellers continue to expect those same prices?

As for attached property, we are ONLY 160% worse than in 2011, but better off than in 2012.

I draw a few conclusions from this and other data that I have published recently in this blog:

1.  There are less buyers for more expensive single family homes and relatively more for attached properties;
2.  Many of the frustrated listings are ones that have been purchased since 2010 and had high original purchase prices.  Those sellers can't bring themselves to realize a loss.  Hence the stagnant listings, expireds and terminateds. They live off hope of a turnaround.

Once sellers get it in their heads that their properties are only worth what buyers will pay regardless of what they paid for their properties, the ratio will start to descend further.  I believe that time is coming although it will take time for the required volume of sales to diminish the outstanding inventory.

My next report will be the Vancouver SDI followed by the Market Report by Area and activity. It will show an increased absoprtion rate, i.e. sales to listings but a still high outstanding inventory level.

May 2013 Seller's Delusion Index
  Richmond-Single Family Dwellings       Month of April-Detached Properties
Listings:   2013 2012 2011 2013 2012 2011
# of Sales   68 96 146 88 111 140
# of Expireds   79 112 79 59 82 46
# of Terminated   42 107 86 48 66 70
Ratio of Expireds        
& terminateds to  SDI    
Month of May   1.77 2.28 1.13
Month of April   1.21 1.33 0.829
Month of March   1.81 1.34 0.338
  Richmond-Attached Properties Month of April-Attached Properties
# of Sales   143 166 245 150 181 230
# of Expireds   76 98 46 90 94 37
# of Terminated   54 127 93 48 105 83
Ratio of Expireds        
& terminateds to  SDI    
Month of May   0.91 1.36 0.567
Month of April   0.92 1.099 0.522
Month of March   0.886 0.667 0.276

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