Ulsterman commented yesterday sharing an exchange with a local radio host. Will the current price drops end up the start of something bigger or a rehash of 2009?
I sent an email to Lynda Steele on CKNW because she stated that she was confused by the local market. Some say prices are down, and yet others say they’re going up. Then they quoted the BC Assessment report that came out today and is warning that assessments will be up 30-50%. I explained in my email that since prices peaked in Spring 2016, they had since made a fairly significant correction.
She responded and asked if i were a realtor. I replied with:
No, i just take a keen interest in the local market but i have no “official” expertise. But neither do i make my living from encouraging people to buy or sell a house, so I have no vested interest either. It’s always a good time to buy or sell according to BC Realtors, so when i hear they are guests on radio shows I don’t put much faith in their advice.
My understanding of markets before corrections is as thus. First sales collapse (check), sellers desperately hang on, refusing to make significant discounts – price stickiness ( check), eventually some people have to sell (job losses, moves, divorces, debt loads etc) and this sets the new price – already happening in the single family home market.
By Spring there will be a tsunami of houses hitting the market as people try to beat the price drops and of course buyers figure this out and wait for lower prices, compounding the problem for buyers. This has happened in all markets that have corrected, from the US, to Ireland, to Spain. Vancouver will feel the pain too. With all the new mortgage qualification rules, foreign buyer taxes, so-to-be reduced AirBnB gravy train, rising interest rates etc, I think you’d be foolhardy not to just wait and see before buying. There’s almost no upside potential, but a massive risk of watching hundreds of thousands of equity get wiped out in months.
Imagine someone who has moved from a condo to a townhouse over the years and just recently leveraged to the maximum to buy a house this Spring. Maybe they put $500,000 down and borrowed a million. With the already-happened 20% correction they’ve watched $300,000 disappear. It won’t take much more before a decade of equity accumulation is gone. Leverage is wonderful when prices are rising, but it’s brutal when they go down.