B.C.’s Blipping Real Estate Market

Is this the beginning of a real estate recovery in B.C., or just another blip?

Last Fall, we were inundated with stories about how this recession was on par with the Crash of 29. This summer, it’s all about how it’s over and happy times are here again.

I’m talking specifically about B.C.’s favorite amateur investment – real estate. The media is breathlessly reporting that home sales are starting to boom again – rising 77 per cent in the second quarter over the first quarter.

This is being called a “housing rebound”. It isn’t. It’s the housing market crawling out of a deep dark hole excavated by greed and resulting fear.

Somewhere between the absolute gloom of winter and the more sober thinking of spring, people realized that prices had dropped from the upper stratosphere to somewhere in the vicinity of Earth.

This was merely a settling of a market driven too high, largely by amateur investors. But it seems that many didn’t get the memo, and so have now rushed in again to buy in anticipation of increasing prices.

This is speculation and it’s the B.C. disease. Every drop in house prices is thought of as a buy signal by the masses who listen to mantra that real estate is always a good investment.

It is — if you’re lucky enough to time it right or hold it for 20 years like your parents did. But if you’re a short term thinker, as most are, it could bite you badly.

Let’s go over this again. Real estate invariably has cycles of about six to eight years, with the first two thirds of that cycle being stagnant and the last couple of years accounting for most gains. The last cycle was longer than usual, which is why prices soared.

It’s also why they peaked and fell, although probably not far enough. A price drop for a crackerbox on the East Side from 700K to 600K doesn’t make it a deal.

But enough people seem to think so that they’re going for it.

As always, they’re likely going to have to wait a long time to make any kind of profit from it.

I’ll ask you. Is this a sustainable rebound or a mere blip?