Real Estate Update: Surf’s Up And The Ocean Is Nowhere In Sight

Surfing, since its early existence, has been a culture and lifestyle lived by a few and desired by many. Surfing, however, is not an easy sport to accomplish. The skill of surfing real waves—6 feet or larger—is extremely challenging. I know this personally as I have taken a few lessons and spent many hours waiting for the right wave only to miss it because I was not ready or I could not master the paddle and pop-up approach to catch the wave.

NLand Surf Park in Austin, Texas is trying to give the non-surfer dude the total beach bum experience with the perfect Waikiki surf wave in the middle of Texas; a place with no ocean in sight. The ultimate goal: to make it easier to learn to surf. “It takes a long time to become a surfer,” said Fernando Aguerre, president of the International Surfing Association—the global governing body for the sport. “If you’re in the ocean for an hour, and you get six, seven waves, you’re very lucky. Learning to surf is like learning to play the guitar when you can only strum once every 30 seconds.” Some who have surfed NLand say it feels just like natural waves but with more frequent and longer rides that give novices more time to properly position themselves and build their confidence and skill; a perfect wave for the novice.

Like NLand Surf Park which produces perfect rideable waves, the last year has been producing perfect real estate investment waves in the Vancouver and Fraser Valley real estate market, especially for the novice investor. These novice investors have felt like they are world champion surfers and can hang ten even on the biggest waves. Unfortunately, these big wave experiences have primarily been about equity gains and not about positive cash flow. Market rents have been on the rise, but not at the same pace as the increase of property values. If the tide changes—and it will—it could create the unprepared novice to “eat it” as the surfers say; slang used after a bad wipe out.  So what has the seasoned or sophisticated investor been doing with this perfect ridable real estate wave? They too have been catching the wave and riding it with ease, building equity in their portfolios, increasing their cash flow through increased rents, and liquidating poor performing properties. The surf has been up and opportunities have existed for all that have been willing to drop in.

The surf culture has a language all its own. The words and sayings certainly can be used to describe our market over the last year, and even where our market is heading into the fall. For instance, the word “akaw” is shouted when surfers spot a huge and perfect wave, or when they are shocked or surprised. For at least the last year, anybody engaged in the market has been shouting “akaw” from every roof top; everybody has been jumping on the party wave. The “akaw” market has brought many a “Shubie” and “Barney” investors to the market. A “Shubie” is somebody who buys surf gear and clothing but does not surf, and a “Barney” is a surfer with limited experience in the waves. Shubies and Barneys have been busy and active in the market place resulting in many months of record sales volume and increases in values. However, currently the months of July and August have brought a lull into the market, a time of waiting for the next set of waves to roll in. It also may be seen as a “clean up set”, meaning a wave or set of waves that are larger than average and break before the line-up, resulting in clearing the lineup of surfers and leaving the next set of waves open for the seasoned surfers, or the market re-aligning for the sophisticated investor.

The month of September and the balance of Fall will be very interesting. Will it be a “clean-up set”, a “sucking dry” scenario, a “noodled” session, or another “cranking” market? The clean-up set is straight forward: July and August were months of a clean-up set. Will September bring a new wave of activity or will it continue in a lull? I personally cannot see the market experience “sucking dry.” Sucking dry is when a breaking wave causes all the water to be drawn off the sea bed, leaving it the ocean floor completely exposed, resulting in the surfer crashing down onto what lies below him—essentially a total market collapse. The surfing term of “noodled” means total exhaustion and the surfer is completely played out and struggles his way to shore. “Cranking” on the other hand is fairly obvious and illustrates the crazy market we experienced this spring with multiple offers, sale prices being 10% over list price, and an increase in values of over 35% in less than 12 months.

My thoughts as we move into the fall market and early 2017 are this: we are currently experiencing a “clean-up set”—overpriced, poor condition, or poorly located properties are going to struggle to sell over the next few months. Many will need price adjustment, maybe as much as 10% to sell as we are in the lull. The market that was “cranking” super strong with wave after wave of buyers since January became “noodled.” Exhausted and tired, as well as the new foreign buyer tax, have helped to create a “washing machine” effect in the market place; a spin cycle that you cannot get out of, no matter how hard you paddle and try to reach for the surface. The market really needed to take a breather or a lull.

A typical surf session does not have wave after wave coming through, unlike the Vancouver and Fraser Valley which had 12-18 months of waves coming through with no breaks. In fact, the waves were the heaviest waves we have ever seen in the market. They were literally waves that could only be found at places like Jaws in Maui, or the Maverick waves found in central California. These massive waves “clucked” many investors in the market place, meaning they made them chicken—and for good reason. Sophisticated investors understand the market cycles and know that this Maverick and Jaws real estate wave were not sustainable. Jaws and Maverick sessions are seasonal and have a short fuse when they go off. The die-hard surfer appreciates a decent swell that packs power but not so much as making it a clucking experience. They also appreciate a steady offshore wind that will hold the wave and then make the wave even smoother, larger, and silkier to ride. In our market, this is the resurgence of our offshore buyers reentering the market. As we move through the fall and into the spring market of 2017, expect the market to stabilize and become a solid balanced to the sellers’ market.

NLand Surf Park produces the perfect wave for the novice surfers, much like the 2016 Vancouver and Fraser Valley market has been producing a perfect investing wave for the novice investor. While many of the purists, surfer and investor worry that the perfect wave will destroy the true essence of why each one engages in the game.

If you would like to receive a copy of the statistical market report 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  ​