It’s a supply problem
October sales in the Fraser Valley were off 18% from October of 2020. Will this push prices down?
No, prices are not expected to decrease as the number of new listings received in October dropped a stunning 29% from last year. The total inventory of active listings on the Fraser Valley Real Estate Board MLS is 50% of last year’s inventory. We need more housing – it’s that simple.
2020 – Record Setting Year
The spring market was on track to be very active and then everything changed. COVID-19 has impacted every sector of the economy including the real estate sector.
As the above graph shows sales began to drop in early March and new listings followed two weeks latter. What happens next will depend on several factors not the least being how long the economy is held down in order to fight the outbreak.
Let’s all do our part. Stay safe!
*Note: March 29-April 4 sales will be higher (15%+/-) as more sales are reported. No accurate data available for units Sold April 5-11. Sales data typically has 2-3 week lag is reporting as buyers conduct an inspection, obtain financing, etc.
SALES up 24% SUPPLY down 14%
The Fraser Valley Real Estate Board saw 974 sales in January, a 24.2% cent increase compared to 784 in January 2019.
Active listings in the Fraser Valley MLS totaled 5,143 at the end of January 2020, a decrease of 14.2% from the same time last year.
BC Market Update
The Times They Are A-Changin’
Fraser Valley Real Estate Board stats July 2018
– Net sales were down 7% over last month to 1290 sales and down 33% for the same month 2017.
– Listings received down 7% over last month and down 12% for the same month last year.
– The board’s inventory of active listings was up 4% over last month to 7399 and
up 24% from the same month last year (5970).
HPI® Benchmark Price Activity
– Single Family Detached: At $1,017,400, the Benchmark price for a single family detached home in the Fraser Valley decreased 0.1 per cent compared to June 2018 and increased 5.3 per cent compared to July 2017.
– Townhomes: At $557,500, the Benchmark price for a townhome in the Fraser Valley in the Fraser Valley decreased 0.1 per cent compared to June 2018 and increased 14.7 per cent compared to July 2017.
– Apartments: At $450,400, the Benchmark price for apartments/condos in the Fraser Valley decreased 0.7 percent compared to June 2018 and increased 32 per cent compared to July 2017.
Takeaway: Prices are holding up remarkably well but this will change if the supply continues to outpace demand.
As always the overall Fraser Valley stats may not reflect your product type or community.
– The inventory of Detached homes in the Fraser Valley is up 14.4% from this time last year while the inventory of Apartments is up 71.1% from a year ago.
– Abbotsford saw the Detached supply grow by 8% while Apartments grew by 9.1%
One more stat: The combined Home Price Index for the Fraser Valley shows an increase of 93.6% from five years ago!
Questions? Call me.
New Cars vs. Homes
The following calculations are based on some “facts” that I found on the internet. So they must be true.
Please don’t flame me. I know there are numerous flaws in my model but I think it is sufficient to high-lite the importance of making prudent choices in one’s spending habits. I could have compared to vacations, entertainment, wardrobe or even nonfat-soy milk-extra whip-frappuccinos. The concept is simple, do without some things so you can afford other things. The Wealthy Barber, mom & dad, etc., not a new concept.
Housing in the Lower Mainland is expensive and it’s likely to become even more expensive. It’s the most beautiful place on the planet (yes I’m biased) so people want to live here and due to geographic and land-use constraints supply is extremely limited. Supply and demand, again not a new concept.
If you want to own a piece of paradise don’t resent those that bought before you. Instead, learn from their example. Be disciplined and find a way to save, even if it hurts!
The above graph shows the growth in prices for single family homes (houses) since January of 2012. The red circles indicate the introduction of the 15% Foreign Buyers Tax in Vancouver and most of the Fraser Valley (August 2016) and then in Ontario (April 2017). As you can see Vancouver and Fraser Valley sales have surpassed the pre Foreign Buyers tax peak but Toronto has not.
This graph shows that the Foreign Buyers Tax had less effect on Vancouver apartments and little or now impact on Fraser Valley apartments. Toronto apartment prices appear to have stalled.
This graph focuses exclusively on the Fraser Valley and indicates the increased values of apartments vs houses vs town houses. As you can see house and town houses (to a lesser extent) prices appear to be leveling off while apartment prices are on fire.
The Fraser Valley condo market makes me nervous from the Buyer’s perspective.
“Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities … will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.” Warren Buffett – Berkshire Hathaway
Foreign Buyer Tax as Predicted – Almost (BCREA Publication)
On August 1, 2016, the provincial government implemented an additional 15 per cent Property Transfer Tax on all residential sales transactions by foreign entities in Metro Vancouver.
To get a sense of how the foreign entity tax impacted home sales in the months following the introduction of the tax, it is necessary to compare today’s sales to the correct counterfactual of where sales would have been absent the tax. This is particularly true given that home sales had already been cooling off since the spring of 2016, and simply comparing a lower level of sales in August to the heights of the market in the early part of the year would dramatically overstate the impact. To provide a more appropriate benchmark, once the tax was announced, BCREA simulated how home sales in the REBGV area would evolve under a no-tax scenario. We also conducted a separate simulation under the assumption that about half of the measured foreign investment for the REBGV area would be pushed out of the market.
It turned out that the impact of the tax was much more immediate than in our simulation, owing to sales being brought forward to July to avoid the tax. Indeed, total REBGV sales fell 19 per cent in August 2016 compared to our projection of just 8 per cent. However, since then, sales have evolved broadly as expected in our scenario analysis. In fact, since the end of 2016, other than a weather-induced blip in January, home sales have been on an upswing and are where we would have expected them to have been at this point, without the tax. Some of that added momentum in the market is due to a return of some foreign buyers, though to less than half of the levels observed in the summer of 2016.
That isn’t to say that the tax has had no impact. Given the preference for foreign buyers to invest at the luxury end of the market, it is no surprise that the tax has had its largest effect on that part of the market. Sales of homes priced over $3 million ramped up in the first half of 2016, reaching 5 per cent of total Metro Vancouver sales in February. By August, when the tax was implemented, that share had already fallen to 3.6 per cent and continued to decline with the introduction of the foreign buyer tax. However, like the rest of the market, sales of luxury homes have also returned to more normal levels in the first four months of 2017. That experience is mirrored in the overall market for single detached housing, which peaked at 47 per cent in the first quarter of 2016 before falling to only one-third of total sales by the end of the year.
Additionally, there has been minimal leakage of foreign investment outside of the Greater Vancouver area. In fact, the regions that remain untaxed have seen relatively stable levels of foreign transactions following the imposition of the tax. The Capital Regional District of Vancouver Island, which encompasses Victoria, did experience two months in which the share of foreign investment briefly spiked higher, but since August the share of foreign transactions has averaged just 5.2 per cent. Moreover, the absolute level of transactions by foreign entities in the Capital Regional District has been trending lower for months, and the slight rise in the share of sales from foreign buyers is more a function of cooling overall sales than rising foreign investment.