Our hot, hot, HOT market is cooling?! The Metro Vancouver market this year has unfolded as I forecasted back in January, with a 15% increase in pricing. We saw our peak activity month in April. Market activity is measured by the monthly ‘sales ratio’ of sales-to-active listings. A ratio at 21% or above is considered a seller’s market and pushes up prices. A sales ratio from 12% to 20% is a balanced market. As you can see in the graph, all home types are headed into a balanced market quickly since April.
Why is the market slowing down? Depending on several factors, we could possibly see prices drop from this year’s peak by 20%-40% as some forecasts predict. What might cause this? There are 4 major market drivers contributing to the upward pressure in price over the past 18 months, most of which are decreasing strength.
- Mortgage rates are on the rise: A heating economy often sees increasing interest rates. And as we get inflation, we also get increased interest rates – see Paula’s Update
- Pent up savings are spent: The spending spree of pent up savings has been going on since fall of last year, and the money is bound to taper out sooner or later.
- Supply is up and increasing: There is an increase in listings for all home types in almost all areas. Some inventory is rising more than others. See graph.
- However, the demand for more space is still high. People want more space at home for play, work, and outdoor space to enjoy. This is the main factor slowing the decline in our market. Even still, some Buyer’s are holding off to wait to see what happens. This would cool the market further.
What else might affect our market?
All these factors are allowing our market to balance out from the dizzying pace we have seen this year.
Possible Tax Changes: A majority government could mean some serious tax changes to earn back the billions of dollars spent on propping up the economy and supporting our citizens over the pandemic. This debt will require repayment. This alone could cause a cashing-out of real estate investments across the country, slowing the market by increasing inventory.
Possible International Buyers: There may be an influx of money from international buyers post pandemic, which could increase prices. How much money to be invested is uncertain. For instance, it may be more challenging for international buyers to bring money out of their home country. The Foreign Buyer’s Tax implemented in July 2016 to the slow flow of international money into local real estate will still be a hurdle for international buyers to return to our market. And of course, international buyers are often investors wanting to buy at the best time at the best pricing. There would need to be a large influx of international money to drive prices up and counteract the other factors causing the slow down at the moment.
Should I still sell? There is still lots of steam in the market! We are still helping clients sell before this window of opportunity closes. Just last week we sold a home with 15 offers for $200,000 above list! With professional home preparation, creative marketing, optimized showings schedules, we are still getting fantastic above-market results. If you plan to make a move this year, we recommend you do not wait long!
Should I buy? The very best time to buy is in a softening market just like we are seeing now. “They don’t toll a bell when the market hits bottom” so the best buying opportunities are on the way down. When it bottoms out and begins to rebound, sellers regain their confidence and may not be as willing to negotiate. The time to buy is now in a softening market. We are armed with detailed market data and stats so we can be very convincing when presenting our client’s offers on properties. This has resulted in some incredible deals for our buyers over the past few weeks.
So, what next?
It will take some time for all these factors above to take effect, and I expect to see some market swings up and down before it does. It will be and interesting ride as we head into summer, the next federal election, and some repercussions of the past 18 months of government stimulus spending.
As always, please do not hesitate to reach out to discuss how your moving plans can be best timed with our market and forecasts today.
RIDE TO CONQUER CANCER FUNDRAISER UPDATE
The 2020 Ride to Conquer Cancer was cancelled due to COVID-19 and the 2021 event has been shifted into a digital event where riders fundraise, commit to pick a challenging ride route, and then cycle it. Marty and Adam plan to do just that this summer and continue to fundraise for this.
The event is expected to return in 2022 in its full glory, and we look forward to getting out there when it does! The event will be totally revamped and has a great new name: “The Tour De Cure”.
Thanks for all your donations to this important cause. This past year has been a challenging one for fundraising dependent organizations, and continued support in these tough times help to keep the search for cancer treatment options moving forward.
A recent breakthrough made in our own province highlights this point. Here is an excerpt from the BC Cancer site:
“A recent discovery in Ewing sarcoma, an aggressive and often fatal childhood cancer, has uncovered the potential to prevent cancer cells from spreading beyond their primary tumour site. The breakthrough provides new insight into what triggers the process that allows cancer cells to survive while traveling throughout the body in the bloodstream.
Research is now underway to investigate whether the same shielding behaviour can be found in other cancer cell types, including acute myeloid leukemia, melanoma, pancreatic adenocarcinoma, central nervous system tumours, and in some types of lung and breast cancers.”
We would love your continued support for this great cause, a link to donate online can be found here:
MORTGAGE UPDATE
Since February we have seen the bond yields creep up, causing lenders to increase their discounted rates. This trend is to continue but large increases are not expected. The Bank of Canada is expected to keep the overnight rate unchanged until late 2022. The forecast is that the Bank of Canada will make 2 rate increases in late 2022 but this could get pushed into 2023.
