Transition: the process or a period of changing from one state or condition to another. This definition is the perfect description of what is happening in the Fraser Valley and Vancouver real estate market today. For some people, transition is seen as something positive, but for others, transition can be seen as negative. What feelings do you experience when you hear the word “transition”? What feelings do you experience when you hear the word transition in the context of our fall real estate market?
The transition period in a real estate market can be one of the toughest markets to buy and sell in. When we compare a seller’s market or a buyer’s market, the trend is well defined; either the seller or the buyer is in control, and they write and dictate the buying or selling rules. These two markets often take long periods of time to establish themselves before one or the other accepts that they are not in control of the market and submit to one another. What we so clearly saw happen in the last few years were buyers submitting to the sellers at any cost.
Does transition in the market mean we are now in a buyers’ market? No, we are not. However, it is the transition period that is causing us to feel like it is a buyer’s market now. The transition period—or the handover of control and struggle for the power in the market—is making it feel like a strong buyer’s market, when in fact, it is more of a balanced market. Through the transition period, sellers are in denial. Sellers still believe and expect above-market prices for their properties. The buyers though, are either heading for the exit doors and patiently watching the market slump or they are contentiously negotiating deals that are making the sellers wish that they would have sold six months ago.
The quick transition from the seller’s market, or the handover of power, is making it feel like it is aggressively moving into a buyer’s market. When we look at the numbers and adjust for seasonality, it initially feels more dramatic and we quickly jump to a full-on buyer’s market. However, over time the transition will temper and smooth out to more of a balanced market. Transition periods are good as they are what defines markets and investors. I actually like transition periods in the market as I believe they are necessary for a healthy market. Why? Because investing starts to make sense again. Investment fundamentals are once again important. Properties are back on sale and sound advice is back on the table. In the transition, it can be very difficult to help buyers and sellers understand the real values.
We are in transition. We’ re in a state of change, market moves, conversion of value, the handover of power, and changeover of markets. And we know these are in play, but for how long? How long will the market stay in this period of transition? I believe we will be in this transition period for approximately 3-5 months before the sellers and the buyers come to a mutual understanding of what the new market looks like. A market that is healthy and balanced, a market where buyers will return and be actively buying and investing. A market where sellers have adjusted their expectations and are in fact pricing their properties for the market. It will be the return of a normal market.
In fact, if I viewed the STR (Sell Through Rate) numbers without prior knowledge of the last few years, my response would be that the Fraser Valley is functioning as a normal market. However, our perception of what is normal has been dramatically altered because of the past. The luxury market is taking a big hit with horrible numbers and then followed by the higher price point single-family homes. Affordability will define the market in the next 6-12 months. Enjoy the stats and call, text, or email me if you have any questions regarding the market or investing.
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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