Looking Back & Ahead
The turn of the year always causes us to look back at the year that was and to consider what could be for the year ahead, I’m sure many of you have been doing this personally and perhaps professionally too. As your trusted real estate team we’ve been watching the various markets across the Lower Mainland and Fraser Valley with great interest these last few months and wanted to share where we believe we’re at. We’ll review the data available to us first, then we’ll consider what that may mean for you as you consider your real estate plans for the new year. If you’re not a data person, make sure to checkout the summary ‘What Did This Mean For You?’ and ‘What Does This Mean For You?’ sections.
Wrapping Up 2020
Firstly, how did 2020 wrap up? Well, with great market challenges! Should we have expected anything else after that year? Around late October I began to become concerned with inventory remaining very low. The Langley detached market was a powerful example of low inventory, without a single month in 2020 eclipsing the 2019 numbers. With very low inventory to begin with we had hoped that it would finally climb in the Fall, instead it dropped the opposite direction. See the precipitous plunge below:
If you’ve ever had us walk through the SnapStats with you before you’ll know that anytime the inventory and sold lines tighten we expect prices to increase, well that’s exactly what happened. As inventory collapsed from already very low numbers this drove prices into the stratosphere, with the average sale price climbing $220,000 from $975,000 to $1,195,000 between December 2019 and 2020. Now, that doesn’t mean that all single family homes in Langley are now worth $220,000 more, but they are up substantially, much of the increase coming in the past two months.
If you’re wondering if it was just Langley, it wasn’t, Cloverdale’s single family market was the most extreme, where sales dropped below inventory, producing sales ratios over 100%, 148% to be specific, the highest in the Valley. That means that not only were all of the homes listed that month were selling, but past inventory that was previously deemed to be overpriced was also being snapped up.
Even the markets that have struggled since the 2016 boom, notably South Surrey and White Rock, mirrored the trends across the Fraser Valley – a rare dislocation from their usual tracking of the Vancouver Proper markets. The Fraser Valley is on fire, for all the reasons you’d expect in our current environment, people want more space, more bedrooms, a home office, and distance from their neighbours.
Not only were 2020’s inventory levels lower than usual, but that low inventory was compounded by an extreme seasonal shift across November and December. We’d usually expect a drop in inventory but it was even greater than usual. My read is that after the year we had a lot of people simply wanted to enjoy the holidays as much as they could and didn’t want their homes on the market.
Many of you live in condos and townhomes, or would like to, and are probably wondering how they’ve been affected. They also suffered from low inventory, although not to the same extreme. The purchase side is more manageable in these categories across every market. The attached markets are trailing in part because of ongoing concerns around strata insurance and aging strata properties. The rule of thumb is pretty simple, the larger the home and lot, the more desired it is, due to the above reasons.
So where did things land? Ultimately, we saw the same trend across the whole Fraser Valley, with sales ratios up from 33% in December 2019 to nearly double 65% in December 2020, and that caused us to advise real caution about jumping into the market.
What Did That Mean For You?
Many of you called us about the prospect of making a move, and if you were looking to both sell and buy you will have heard me say, ‘I’d have no trouble selling your home right now, but unless you have somewhere else to go in the meantime I’m not confident the home you’re looking to purchase is going to be available at a reasonable price.’
Our ‘People Over Property, Always’ approach required us to be forthright and honest about that, and I’m glad that the majority of our clients trusted our opinion and are waiting for inventory to return to historical norms. If you were just selling, then absolutely, our advice was to list immediately, but if you were just buying then clearly we recommended patience.
Where To For 2021?
It’s an inevitability that at some point inventory needs to climb, it can’t remain at this historically low level forever. We are expecting to see a slow inventory increase in the coming weeks, diluting the buyers across more properties, and hopefully dousing the flames of markets on fire. If there are fewer buyers writing on homes in multiple offers, that should slow the price appreciation and will also make the process more manageable for our buyer clients.
I also wouldn’t be surprised to see average prices across some of the most heated markets lower in January and February as desperate buyers, potentially ‘between homes’ after selling their own place, find homes. I have to give the usual caveat that I don’t have a crystal ball, but we have seen slight corrections in the past. 2019 saw a 6% increase in sale price and 2020 doubled that at 12%, and those numbers were almost straight up, with every few corrections.
At the macro level, an increase in the money supply by the Bank of Canada combined with historically low interest rates is definitely fueling the fire and that doesn’t look like it will change anytime soon. As a result, we don’t expect government intervention to drop prices in the near term, so any pull back will have to be at the more local level and a result of increased inventory.
What Does This Mean For You?
What this means for you will depend on your situation, so we’ll layout a few scenarios below:
Selling & Buying (Conservative): If you’re looking to both sell a home and purchase another we believe now may be the right time to at least start taking steps to prepare for your home for market, capitalizing on that low inventory before it climbs. We are quite happy to do our part by securing media and measurements in advance so we’re ready to hit the market if we begin seeing a spike in inventory. Now, the flip side of that coin is that you would be trusting that inventory does climb and that by the time we’ve secured you an accepted offer for the home you’re selling we’ll have an increased number of homes to show you and fewer buyers to compete against.
Selling & Buying (Riskier): We usually like to have secured a firm accepted offer before shopping for your next home, but there is a way for us to purchase first and then trust we’ll be able to sell. Subject to sale is off the table in this market for almost everybody, as it usually is in our markets, but you could choose to purchase first with long dates – a minimum of three months ideally. As long as inventory hasn’t spiked enormously, this is a reasonable approach if you are comfortable with the risk that you aren’t aware exactly how much your current home will sell for.
Just Selling: If you’re selling an investment property or selling your own home and leaving the Lower Mainland then now is the time to pull the trigger. We should move as quickly as possible, without hindering our marketing plan, to capitalize on low inventory and capture some of those frantic buyers used to competing in hyper-aggressive multiple offer situations.
Just Buying: Perhaps you’re a first-time buyer, or looking to purchase an investment property, our perspective is that we should have a good sense of what’s happening with inventory by the end of January. Unless you’re in a desperate situation, practicing patience may be your best bet right now.
We’re Here To Help
Hopefully you can see from the above that we really are trying to do our best to help navigate our clients through these challenging times. We are not simply looking to do transactions for the sake of transactions, we genuinely want to assist you as you make some of the biggest financial and lifestyle decisions of your life. Candidly, what that means for us is that our own business may continue to suffer in the short term, but we trust that by putting our clients first it will lead to long term success together.
If you’re interested in running your specific scenario past us, please don’t hesitate to reach out. We’ll begin by collecting your information, we’ll dig into the data, and then we’ll sit down together or have a video call to discuss the best next steps for your unique situation.
Although we continue to face challenges in our world, and in our market specifically, we enter this year with a sense of hope that our ‘People Over Property, Always’ approach will keep us on the right track.
Thank you for your ongoing trust and support.
Warmly,
David & The Team