Enter the death cross.
The ominous term, one that should be familiar to those following the stock market, isn’t literally a matter of life or death.
But it does often signal an asset will lose value, and according to new analysis from Eitel Insights, Vancouver’s detached-home prices have spiraled into a death-cross scenario.
Death crosses occur on charts when the short-term average price crosses below the long-term average, suggesting immediate demand has fizzled to the extent that longer-lasting declines are on the way.
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And that’s exactly what happened in Vancouver last month, says Dane Eitel, a local realtor and founder of Eitel Insights, which applies stock market-style technical analysis to housing markets.
“This shows that we are going down longer. The short-term is actually starting to dip past any previous points since 2013,” Eitel explains of the drop in short-term average pricing, which is based on annual prices. The long-run average is calculated over 26-month periods, a timeframe Eitel says has proven more reliable than two-year cycles.
This is just the eighth time that this has happened in Vancouver since 1978, the furthest back the Real Estate Board of Greater Vancouver provides average pricing.
Eitel says there is a psychological factor that has sent investors looking to other markets for single-family homes. They don’t anticipate future gains in the coming years, so they’re leaving the market for greener pastures.
Meantime, expanded stress testing for mortgage applicants has eroded the buying power of some who now have to qualify at higher rates. “The years’ momentum of continually increasing has seized to exist, so now this longer-term momentum has to catch back down,” he says.
The last time Vancouver’s single-family home market was in a death cross was 2012, a situation that persisted for less than a year. But Eitel sees the current situation as mirroring the preceding death cross in the ‘90s, which saw a similarly exuberant runup in pricing.
Based on his analysis, Eitel foresees Vancouver detached-home prices — currently averaging $1.7 million — bottoming out at the $1.4-million-mark in 2020–2021, before beginning a historic runup in prices that ends with the average price of a detached home peaking at $2.8 million in 2028.
The start of that scenario would have another, less morbid name: a golden cross.