Have you ever held an ice cube in the palm of your hand on a hot summer afternoon? It does not take long before it becomes a small puddle of water, and eventually has no value or purpose for what it was originally intended for.
As I write, your hard-earned money in your bank savings account is like an ice cube slowly melting away. The longer you leave it in there, the less value it has over time. Even if you are receiving an interest rate of 4%, it will be diminishing in value against the items of value that we need each day.
It has been said that the three necessities in life are: food, shelter, and clothing. I do not often go grocery shopping, but the other day, my wife asked me to pick up a few things. I just about threw up when I saw the amount I owed for the few items I picked up. Wow! Grocery prices are on the rise!
Clothing has not changed significantly as of late. I believe it is because we are too busy working from home in our sweatpants; however, that will change once we can start to be social again. Clothing companies will jump on this opportunity with some slick marketing and sell us all on a new wardrobe. Fingers crossed we do not need to size up to fit our new threads! That being said, clothing will be more expensive post-Covid in my opinion.
And then finally, there is shelter. I have to admit, I missed this play. Back in March of 2020, I had no idea that real estate would explode and escalate in value like it has in the Fraser Valley and Vancouver market. Yes, I expected a surge in the market last May, June, July, and maybe into early fall, but not to the extent that it has played out.
The necessity for shelter is the exact opposite of an ice cube on a hot summer afternoon. The market was sizzling hot, but the asset or housing market was as solid as a rock-hard ice cube at the north pole in January. The market was so solid that the average price increased by an incredible 25.6% for all property types over the last year. Acreages were up 37.3%!
Unfortunately, I have seen this melting ice cube analogy play out far too often in my 29-year career of helping people buy and sell real estate. An example of this is a buyer waiting to save a few more dollars for their down payment, or they believe the market is too expensive and it will adjust down.
Our current market is so hot at this time that the ice cube is literally melting within seconds. Prices are on the move weekly, and what was last week is now 3-5% more today over the last 3 months. Can this outrageous trajectory of value continue? No. At some point, the value, interest rates, and the supply will outstrip the demand. When this happens, we will see a market that slows and prices adjust to the cooler market.
But what about that ice cube or the money you have sitting on the sidelines? The value of it continues to diminish. The best advice I can give you as an investor is to continue to put your money into assets that are a hedge against inflation. That asset in my world is real estate.
Speaking of that asset of my choice. For the sixth consecutive month, Fraser Valley recorded record sales that have never been seen in over 100 years! The incredibly low interest rates and pandemic demand has fueled an appetite that cannot be satisfied by buyers. Many of those buyers are investors like you and me looking for vehicles to hedge against inflation. Check out a few stats from the Fraser Valley Real Estate Board:
MLS® HPI Benchmark Price Activity
- Single Family Detached: At $1,163,400, the Benchmark price for an FVREB single-family detached home increased 5.1 percent compared to January 2021 and increased 19.9 percent compared to February 2020.
- Townhomes: At $600,300, the Benchmark price for an FVREB townhome increased 3.4 percent compared to January 2021 and increased 10.1 percent compared to February 2020.
- Apartments: At $450,900, the Benchmark price for an FVREB apartment/condo increased 2.5 percent compared to January 2021 and increased 5.3 percent compared to February 2020.
The need to have a strong agent working on your behalf has never been more important in this complex market that we find ourselves in. Sellers certainly need the expertise and guidance of a strong listing agent to help them get the most out of their prized asset or property. However, it is the buyer that needs super-power to find and secure the best property for them. In this market, the super-power is your agent. The Agent needs to have a high level of expertise, knowledge, and most importantly, a high-relationship value within the real estate industry. Relationships between agents is often the key to getting deals done in this white-hot market. A small piece of advice, the respect your agent has in the marketplace among the other agents is often the key factor in finding and successfully winning in a bidding war. Chose your Agent wisely.
Please reach out to our team for more information or help with all your real estate needs.
Click Below To See The Fraser Valley Stats:
Click Below To See The Vancouver Stats:
STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales
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