Real Estate Market Update: Back to the Future

If I could turn back time

What would it be like if we were able to turn back time? To take all the knowledge we have today and go back to the future as if we were Marty McFly from the blockbuster movie Back to the Future. I can certainly think of several things I would do differently; decisions, choices, and actions that I made, especially in my younger years. When it comes to real estate, there would be properties that I would have bought and properties that I would have never sold. We all have those would-have, could-have, should-have stories when it comes to the real estate market in the Vancouver region, especially with the amazing run of the market in the last few years.

The book The Canadian Real Estate Cycle, written by real estate guru Don R Campbell, discusses the cycle of the market: the boom, slump, and recovery, or in other words, the past, present, and the future of the market. I have listened to Campbell share his insights on his amazing research, as well as studied it, lectured on it, and have seen the cycle in action firsthand over my 26-year career as a real estate agent in the Fraser Valley. Over the years, I have always believed that the cycle could only continue to cycle through as though it were a clock; boom, slump, recovery, boom, slump, recovery, and so on and so on, just as any pattern continues and never breaks… Or at least I thought so until this past year.

We all know the saying: “Time does not stand still and you cannot turn back time.” Both are true, but do they apply to our real estate market? My view was that the market does not stand still, or at least not for long. It is either gaining strength or losing strength depending on what side of the buy/sell equation you are on. But what about turning back time or reversing the cycle of the market? Can a market be in the end of the boom cycle and then reverse to a beginning boom cycle or even a recovery cycle? Or can it turn back time?

Would that not be brilliant?! Think of all of the knowledge we have gained while experiencing one of the most amazing real estate cycles in the region or the world. Imagine, the cycle moving from recovery into boom and then just before it enters its final stages of the end of boom, it turned back time and gave us another opportunity to experience the boom cycle all over again. Yes! A Marty McFly back to the future real estate moment!

Campbell does an amazing job of laying out the dynamics of how the cycle functions and reacts to various drivers and influencers in the market. He even provides us with the real estate cycle formula that is so clearly laid out in his book: boom, slump, recovery. However, the current market is not behaving as the typical market and is not following the cycle. It literally backed up time over the last 3-6 months and has reversed on itself or gone back in time.

From my perspective, there are two factors that contributed to creating this new boom cycle. First, the buyer multiplier. The incredible price surge in the market made average property owners wealthier than they ever thought they could be overnight. Plus, the wealth they accumulated was tax-free dollars. Many of these new multi-millionaire property owners sold and then repurchased further into the valley. They bought a new upgraded home for half of what they sold for, and then went on to spend a large portion of the other half on an investment property or two. The multiplier: one buyer becoming two or even three buyers.

The second factor is the result of the multiplier: an incredible shortage of inventory. The inventory of single-family, townhome, and condo properties are at the lowest level ever recorded in the Fraser Valley; therefore, when you factor in the growing population of the region, there is not much supply for the incredible demand. Today, there are approximately only 50 condos for sale in both Langley and Abbotsford, and townhomes are not much better. Keep in mind that 25-30% of the listed homes on MLS are under contract resulting in a few properties that many buyers are duking it out for.

Developers are desperately trying to fill the void of low inventory and capture these hyperactive buyers as well. Moreover, for they are, literally selling out their developments in hours. Unfortunately, the lag time for developers to bring on new developments is often a 2-3 year cycle. The market today is screaming for new developments or any product to buy! However, the cities and municipalities cannot approve these developments quick enough to fill the supply needs of the buyers.

The DeLorean time machine car and Marty McFly’s timing was critical for him to go back in time. The boom cycle in the Valley has reversed on itself. As an investor, study the market or find an agent that knows the market extremely well and make sure your timing is as good as that of Marty McFly’s.

The Fraser Valley once again outperforms the critics. The mortgage stress test, higher interest rates, and the past intensity of the market were to going to be the influencers to slow the sales volume and reduce the STR (Sell Through Rate). The entire Fraser Valley market was up from January 2017. Condominiums and townhomes lead the charge most areas being in a very strong Sellers’ market. Single-family properties remain strong with balanced to sellers’ market. Vancouver’s condominium and townhomes are echoing the Fraser Valley market with strong numbers throughout. However, the single family, especially in the luxury home market is really suffering with most of the areas in a solid Buyers’ market.

If you would like to receive a copy of the statistical market report, contact us here or if you would like to be on our next Investment Bus Tour contact us here.

 

Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com

 

STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales

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