Vancouver oversupply of Homes is dangerous | M Rindia of Canada ...

The latest data on the housing market is out, and the sensation that it has stirred is revealing. Sample some of the talking points in this report: ?the sales figures for the last month represent the lowest figure in the last fifteen years; the total months of inventory ? the duration of time it would take to sell a housing unit compared to another base month ? hit double digits for the first time in twelve years. In spite of the preceding scenario real estate developers continue unabated putting up new housing units. A crisis beckons in Vancouver, the apt term for this crisis ? Vancouver oversupply of homes: http://www.realestatevancouver2010.com/homes/vancouver-west-homes/.

Vancouver homes may be overpriced

In a market economy, the trend is that that social control mechanism that Adam Smith referred to as the invisible hand (the price mechanism) will in its own way calibrate the market. Either the property developers are rudely ignoring the invisible hand (sic) or the effects of the looming market correction are yet to be felt. A mismatch between supply and demand (a mismatch tagged Vancouver oversupply of homes: http://www.realestatevancouver2010.com/homes/vancouver-west-south-granville-homes/) portends some interesting scenarios to the Vancouver housing market and to the economy at large.

The most obvious remedy will be that the pricing of the housing units will have to come down. Developers eager to dispose their properties to starve of baying creditors will offer fire sale prices to the market. Potential buyers, who will no doubt have smelt the blood, may hold back a bit resulting in further plummeting of prices. In this way will the market achieve equilibrium ? when the buyers and sellers converge at a common market price. The loser in the above scenario is obviously the developer.

The second possible scenario that a Vancouver oversupply of homes

The second possible reason is that creditors might get their fingers burned as the Vancouver real estate market corrects itself. This is on account of the fact that the lines of credit that might have been extended to developers will dry up ? because developers might be stuck with investments that are not moving on the Vancouver market. This is a scenario that affects the entire economy because it means that credit becomes more expensive to obtain and consequently growth of businesses is in many ways stifled. It has left many areas like this, in great disarray.This has the hallmarks of the Housing bubble experienced in the last decade but hopefully, the economy will not get to that point.

The third scenario that is the only bit of good news in this whole mess is that with a drop in the valuation of houses, individuals might just have an opportunity to own a house of their own at prices that are ?reasonable.? Reasonable being prices that are based on the market fundamentals as opposed to perception.

However way it plays out, one thing is certain, the Vancouver oversupply of homes scenario will have a set of winners and a set of losers. Although this is a sad reality, it is the proverbial house of cards that Capitalism stokes most fervently. All yours truly can say about the Vancouver oversupply of homes saga is this: Watch this space.

Source: http://mrindiacanada.com/137-vancouver-oversupply-of-homes-is-dangerous

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