Vancouver real estate | BCBusiness
While it may be easy to target real estate agents for a decline in house prices, the real culprit is in the mirror.
Despite rumours to the contrary, real estate agents are just the messengers when it comes to Vancouver’s volatile home prices.
Agents do not drive the price of the real estate market. There, I said it. There is no collusion or price fixing. There is no “propping up” of price points. The reality is Realtors will help sellers decide a price threshold for a property, but the seller approves it. In many cases, the seller will dictate the price.
When a home doesn't sell, the seller, if actually motivated, will drop the price to the point where the market finds it attractive. Seller's thoughts on prices vary greatly from the buyer's perspective. The cumulative mass of buyers and sellers create the market. Agents don't set the market — the consumer does. An increase in product (listings) with few buyers creates a buyer's market. When sellers don’t lower their price to meet the market’s perception of value, those houses sit unsold and are joined by other listings, creating a build up that result in softening prices as those sellers all lower their prices to meet the market’s expectations. Now we have the question of the day: How deep will the market soften?
Apparently, pretty deep. David Madani, economist with Capital Economics, has forecasted a 25-per-cent price drop in the next two years. Chinese investment dollars are gone. U.S. agents are seeing record numbers of Chinese buyers who are enjoying the rock-bottom prices of new construction in Miami, Los Angeles and New York. We still have consistent immigration to B.C., low inflation and high employment to celebrate, but the lack of interest rate increase and the new borrowing thresholds for insured mortgages will not jumpstart price increases (or sales) anytime soon.
But let’s not be too bearish on this issue. One local agent was alternately vilified and praised for his statement that it was “time to get out now.” He sold his condo and was thinking of buying again this fall. Anyway, sell now is a great theory if you’re a single guy, but a family of four is going to struggle finding a rental in their catchment, and if so, for how long? What’s rental vacancy now, 2.1 per cent? Rent for one, two, maybe five years until the market corrects? I have a longer-term plan for my family, and frankly, the market usually favours one side of the transaction only. Sell at a 25 per cent loss, but buy at a 25 per cent gain. I know that 25 per cent represents a lot of money. But the reality is that I don’t have another five- or 10-year option. If the prices drop and I need to buy, I am pretty secure in the knowledge that I will save 25 per cent on the purchase price as well.
The softening of the market is a harbinger of what is to come. This isn’t the fault of organized real estate. No matter how many Realtors support a bearish or bullish position on real estate, it only ever comes down to one thing: Where do you want to be? That’s why you’ll always hear, “It’s always a good time to buy or sell.” It’s not a trite Real Estate 101 phrase. That’s the reality of helping people determine what they can do and when they can do it to maximize their outcomes to fulfill their home-buying dreams. That’s why the broad brush of sensational statements don’t work. One size does not fit all.