What is Trending In Real Estate?
YouTube, Twitter, and Facebook are a few of the many platforms that curate the best of what is trending online. As I write this, the death of music legend, Prince, and his huge hit, “Purple Rain,” are trending around the world. Tomorrow, the trending could change to Donald Trump’s latest US election campaign exhibition, or a catastrophic world event. Here in BC, real estate is what is trending.
Every day, there are multiple stories written and broadcasted across the various Vancouver media outlets regarding the white hot market. It is a rarity when you do not stumble across two or more people talking about the incredible real estate market on any given day. Common trending stories are: sales volume, lack of inventory, foreign buyers, rocketing real estate values, ecstatic sellers, shadow flipping, buyer frustration, multiple offers, and sale prices well over the list price.
Over the last 24 years of selling real estate, I have seen most of these movements trending in various forms. The trend that has shocked me the most is the multiple offer environments, and the requirements of the buyer to be successful in securing the property. As I reflect back to the previous boom cycle of the mid to late 2000s, multiple offers were not as prolific as they are today; however, if the property was well priced and in a desirable location, it was still common to have multiple offers. The difference between then and now is substantial and it has set a new trend in how a seller executes a multiple offer situation, as well as how a buyer alters their offer to come out the winner.
What is trending today is the multiple offer formula for success. The formula needs to be an offer with no subjects, large bank draft deposit in hand, open ended dates so the seller can pick the dates that suit him or her best, and a price that is well above the list price—often 10% or more over the list price. Looking back to the previous boom cycle, it was rare that I would prepare and advise a buyer to write a completely non-subject offer. What was even rarer was writing an offer over list price. A strong offer back then was an offer at full price without the subject to financing clause. How the trend has changed…
So what is causing this new multiple offer trend of non-subject offers and sale prices of more than 10% over the list price? Logic would say that the common contributors are lack of inventory and huge demand—supply vs. demand. But it is more than just supply vs. demand. I believe it is the execution of the marketing and the financial ability of a few buyers that have created the new multiple offer trends.
The execution of marketing is to compress all showings, give limited access, hold a few public open houses, and drive hundreds of potential buyers through the home, essentially creating an auction event. Auctions by definition are time pressured events where people are usually bidding on something they find valuable. Auctions push a number of our psychological buttons. With numerous people around, there seems to be an increase in your physiological arousal; an effect called social facilitation. According to Wikipedia, as your adrenaline pumps throughout your body, your heart begins to beat faster, and your reactions quicken. This sensation is beneficial and positive when doing sports, but makes for difficult rational decisions, especially when buying property.
Nobody likes to lose, especially the ultra-rich in an auction environment. Craziness happens when the ultra-rich fly in from around the world into Vancouver, one of the most beautiful cities in the world. Sip champagne, eat at world class restaurants, shop at high end stores that offer a 30% currency discount, and most importantly, visit one of the safest places in the world. After experiencing Vancouver, they auction off a valuable commodity (Vancouver Real Estate) and add pride of ownership. This, unfortunately for the rest of the buyers in the Vancouver and Fraser Valley, is where the new trend of non-subject and 10% or more over list price multiple offers were created. The competitive auction environment, the excessive money of the rich, and a valuable commodity has changed the trend when pursuing a property in a multiple offer event. How long will this trend continue? Is this a trend that will become common in future boom cycles in the Vancouver and Fraser Valley or is this a one off? What is trending now #multipleoffers#non-subject#bigdeposit#wayoverlistprice#wewon#welost.
The white hot Fraser Valley single family market is having a significant effect on the strata titled properties. The average price of single family home in the Fraser Valley over the last 12 months has increased by 38%! Townhomes and condos for the same period have only increased by only 17%. However, the majority of the gain has come over the last 3 months! The sell through rate (STR) for both townhomes and condos has moved into a strong “sellers’ market” and I see this trend continuing over the next 6 months. There are still some excellent buying opportunities in the strata titled properties, particularly in condos. The volume of sales is up significantly, however, the selection or inventory is still very good for buyers.
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By Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com
STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales
