Is the Market Going to CRASH 2.0?

I wrote this March of last year, the title; “Is the market going to CRASH” seemed fitting for the time. However, as I write this on the 1st day of March 2022, version 2.0 looks pretty much like last year’s version.  There are a few updates, which I will highlight throughout the article.  

Learn all about the horizontal snowbirds.

Today, everyone everywhere is talking about the white-hot real estate market all the time. Our market focuses are the Vancouver and Fraser Valley markets; however, I speak with agents all over North America and they are also experiencing a similar white-hot market. The combination of ultra-low inventory or supply of properties, and the record high sales volume, has been pushing prices up monthly, if not weekly. Where does this all end? Quoting Isaac Newton, “What goes up must come down.” So, does this mean a market crash is on the horizon? 

Questions that often come up in my discussions are the following: Can this market or markets around North America continue to go up in value? How will new buyers afford these obscene price increases? Will there be foreclosures post-COVID? Will interest rates rise and price buyers out of the market or cause them not to qualify for the new mortgage? Will history—and more directly—will the 2008 housing meltdown repeat itself? 

This may all sound doom and gloom, but in my mind, it is actually quite the opposite. I am filled with optimism for the market moving forward. You might be asking, “How far forward?” To find out what the future holds and understand where things are headed, let us go back in time. I pulled the sales data of a home in Abbotsford on a 65X100 lot. In 1960, it sold for $10,000. Fast forward 25 years later to 1985 and the same home sold for $65,000. Another 25 years later, the same home sold in 2010 for $325,000. These three segments in time have an appreciation multiplier of five or six for every 25 years. In today’s market, this same home is selling for approximately $1,000,000! Over the last 60 years, we have witnessed an 8% appreciation per annum, from $10,000 to $1,000,000. In addition, in 1960, 1985, and 2010, the prices seemed too high and out of reach for many of the average buyers. Does this tale sound familiar to today’s market tale?  

Will it feel like spring again this coming January?

I personally have many reasons why a crash is not imminent or will not happen. A slower or more balanced to sellers’ market will eventually enter our market, but it will not be the doom and gloom or crash that some will predict. As a side note, many of these so-called “experts” are not real estate minds and do not understand the fundamentals of what drives and influences the market. Here are 10 reasons to show you why we will continue to see a strong balanced to sellers’ market for the near and future market:

1. Record low interest rates that will continue to stay low. 2.0 rates will rise but not substantially.
2. People have record personal savings put away. 2.0 still valid.
3. Demographics are peaking for homeownership, especially with the millennials. 2.0 still valid.
4. Foreclosures are at record lows. In most cases, homeowners’ equity position has improved and is allowing them to refinance. 2.0 still valid. 
5. Homeowners are equity rich. 2.0 even more valid.
6. Cash buyers, no mortgages needed for a growing number of buyers. 2.0 even more valid.
7. Banks and government have learned how to manage and work together from the previous crisis (the 2008 meltdown). 2.0 still valid. Banks are reporting huge 1st quarter profits.
8. Immigration will continue to be a huge catalyst for the market. When we open the borders post-COVID, an explosion of buyers will enter the market. 2.0 even more valid.
9. Technology and connectivity will continue to accelerate or give stability to markets, no matter where they are. Elon Musk and “Starlink” are bringing high-speed internet anywhere, anytime. 2.0 even more valid.
10. Inventory, or creations of inventory, will be a major factor in putting upward pressure on the market. No or little supply with strong demand will continue to see prices rise like my example of the small single family home that was $10,000 in 1960. The inventory issue is a combination of lack of land, government regulation, and red tape. Anytime something is regulated or over-regulated, it slows the process and increases the costs. 2.0 even more valid.

That small home was built and sold for $10,000 in 1960, then sold in 1985 for $60,000, and then again in 2010 for $325,000. The question is this: will the multiplier of five or six factor into the price in 2035? Is $1,600,000 to $2,000,000 worth banking on? One year later, we have answered the question. Today, March 1st 2022 that small home is selling for $1,600,000! Prices appreciated an incredible 3-5% per month in the last 12 months!

Why should you be careful what you wish for?

The new question is this: will the multiplier of five or six factor into the price in 2035? Or, is there a new accelerated appreciation rate? Is it worth banking on $8,000,000 for that small home in 2035? 

Reply back YES or NO if you think the small home will be selling for $8,000,000! 

 

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:
Fraser Valley STR Stats
Click Below To See The Vancouver Stats:
Vancouver STR Stats

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

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