Housing Market Update

I just read a very sound report from Scotiabank Group titled "Special Update: Canadian Mortgages". It supports what was reported on the local news last week. The newscasters had interviewed Cameron Muir from the BCREA and a couple of local Realtors. One of the conclusions was that prices have dropped about 5% so far in the last six months, and we may expect up to the same amount again over the next 6 months to a year. The Scotiabank Group report speaks of "further fairly modest erosion of house prices." So, without putting a number on it, they are saying that prices will continue to decline a little bit for the next little while.

While I do not have a crystal ball to predict the future, I am presently of the opinion that a lot of the price drops in the last six months have been due to the fear factor, not sound economics. No one really knows how much the U.S. slowdown will affect our economy and Buyers are afraid to make the wrong decision. Perhaps they are afraid to buy a first home before the market bottom comes, thus paying too much, or afraid to get a mortgage on a home and then lose their income. So, a lot of people are in the "wait and see" mindset. The activity that we continue to experience in the market is from people who are not easily scared off by the media hype, or people who cannot afford to wait due to a change in their circumstances.

With the bailout package in the U.S. having just been put in place, it will take some time to see how much success it has to rescue the U.S. from a serious recession, or even a depression. Depending on the severity of the problems in the U.S., B.C. may not see much of a decline in the economy, since our economy is in some ways more insulated from the U.S. effect (due to fewer manufacturing jobs, more exports to Asia). We will definitely fare better than many other Canadian provinces will.

I believe that there are only two changes that are possible come the spring - either it will become clear that our economy has definitely declined and many people are losing their jobs, which will cause house prices to drop even further, or people will start to realize that our economy will weather this storm, and housing prices will start to rebound. I am optimistic that prices will rebound sooner, rather than later.

I believe that much of the media hype is just that - "hype" - and that time will tell how much our economy will withstand this. I believe that prices are not going to erode for very long, and agree with the experts that price drops will be slow and gradual.

For buyers there are still many reasons that now is the right time to buy. If they sit and wait, they may have less selection, and in the mean time, how many rent payments will they have thrown away? There are many homes that are fantastic steals due to divorces or job transfers forcing a quick sale, and there are definitely many deals to be had in this strong buyers' market. The options and inventory are abundant, so finding your dream home, with all the options and features that you want, is easier than it has been in years.

Also, for sellers, now is a great time to make an upward move, or perhaps to shorten your commute. If you have been wanting that extra bedroom or that larger lot, or to move closer to Vancouver, you can't lose right now. Any declines in your home's value have most likely been more than offset by the declines in the price of the bigger home, or the one closer to town.

Also, in a strong sellers' market, many sellers were tempted to buy first - writing an offer subject to the sale of their home. This is not a recommended practice because it generally costs you more money overall, but many people do it so they ensure they won't end up with nothing appropriate to buy, (with the slim pickings of a seller's market), and to be forced to rent until something appropriate comes available, meaning they have to move twice. With the buyers' market we are in, you can be sure that with the inventory levels we currently have, only the pickiest people will be hard-pressed to find a suitable home to buy. That leaves you free to sell your home before making an offer on a home to purchase, keeping more money in your pockets.

If I can be of service to you in the Mission or Abbotsford area, or if you need a referral to one of my colleagues in your area, please do not hesitate to contact me. My information is in the side panel. Have a safe and happy October!