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February 2024 SnapStats Market Update

Welcome to this month’s market update. We use the subscription program ‘SnapStats’ to help us identify what’s going on in the various submarkets we serve across the Lower Mainland and Fraser Valley.

The below infographic, maps, and video are the materials we’re allowed to share publicly, we have MUCH more that SnapStats allow us to share privately.

Please contact us for specific details on your home or the neighbourhood you’re interested in purchasing in.

I Was Wrong… About Strata AGMs.

Well, you can see from the above that I wasn’t always a savvy real estate professional. Before I was in the industry I was making all kinds of real estate mistakes, including purchasing our first home when we’d only planned to buy a loaf of bread (true story). 

One of my other mistakes was thinking that attending the Annual General Meeting for our townhome complex strata was a “*YAWN*”. Now that I’ve been in the industry for as long as I have been I’ve learned just how important these meetings can be. 

Every week we’re reading strata documents and reminding ourselves and our clients why these meetings can be so important. 

– Want an opinion on strata fees? AGM.

– Wondering about any upcoming special levies? AGM.

– Deciding upon a depreciation report? AGM. 

– Changing the bylaws? AGM. 

Annual General (and Special General) Meetings are incredibly important if you’re a strata property owner. Don’t make the mistake I did by treating them as a bore fest, get involved and active in protecting a huge element of your home and investment. 

If you have any questions about your strata property, never hesitate to reach out! 

Review Of The Month – February

Last year was a very interesting one for us as we saw the number of our clients seeking out condos double, which was primarily reflective of the lower prices providing an opportunity for first-time buyers to get into the market. That’s one of the reasons we have our upcoming seminar on March 12th, there seems to be high demand there right now and as usual a complete absence of education on the topic. 

We’ve loved helping first-time buyers over the years, and Kelsey was one of them, hear what she had to say: 

“We had such a great experience buying our first home with David. The whole process was new to us, and David helped us to feel confident in the process. He was able to use a great strategy to secure a place that ticked off all of our boxes. We would highly recommend David to anyone looking for a great realtor!” – Kelsey M. 

Short, simple, and to the point – thanks, Kelsey! If you’re a home buyer looking to secure a home that ticks your boxes don’t hesitate to reach out!

Photo of The Month – February

One of the privileges of having been in the industry for so long now is that I get to sell the homes that our buyers originally fell in love with. There are certain touches in certain homes that just scream ‘buy me!’ and our latest listing in Abbotsford had a number of them. The one that stood out though was this beautiful wooden crossbeam, every time I’ve thought of this home it’s what I think about.

As we approach the sale of this home, we’re trusting that it will grip the home’s next occupants as much as it did our clients. If you’d like to discuss what you can do to your home to add that extra draw, never hesitate to reach out. 

The Biggest Mistake – Not Being Prepared

Getting Our Ducks In A Row

I have to be honest, I’ve never felt particularly positively toward anyone suggesting I need to get my ducks in a row, or that I’m potentially making a mistake, but usually when I heed their advice I’ll admit they were doing me a service. That’s how I hope you feel after reading this article. Ultimately our goal is always to help you achieve your real estate goals and one of the obstacles to that we’ve observed over the years is for clients not being adequately prepared. Sometimes clients are shocked when we insist upon an initial consult of around an hour and a half, but one of the express purposes of that consult is to do our part in ensuring you are prepared for the journey we’re about to embark on together. In that meeting we’ll often layout very clearly the next steps for the client, which we’ll follow up on to make sure we try to avoid this biggest mistake – not being prepared. 

Going Slow To Go Fast

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January 2024 SnapStats Market Update

Welcome to this month’s market update. We use the subscription program ‘SnapStats’ to help us identify what’s going on in the various submarkets we serve across the Lower Mainland and Fraser Valley.

The below infographic, maps, and video are the materials we’re allowed to share publicly, we have MUCH more that SnapStats allow us to share privately.

Please contact us for specific details on your home or the neighbourhood you’re interested in purchasing in.

Review Of The Month – January

This morning I sat with my friend and client, Mike, and again was reminded of the move he made with his family at this time of year. It’s one of my most memorable transactions as we saw an opportunity in the data and were able to capitalize on it then. I’m seeing the same opportunity now. Read what Mike had to say: 

“We could not have dreamed up a better real estate experience than we received from David Smith. His knowledge of the Langley market and his professional guidance helped us buy a new home and sell our home with precision timing. David’s relentless work ethic found us a home on the exact street we wanted for our family that was not even listed at the time. He then guided us through a process to secure the home, under market price with protection in place to allow us time to sell our home. The work David and his team then put in over two weeks to market, list and sell our home for $75,000 over out list price was remarkable. We could not have asked for a better realtor. His guidance and friendship through this process proved to us that he truly values people over property.”

Mike and his family were able to triple their lot size and put money in their pocket! I still smile when I think about it, even more so when I’m sitting on his patio!

If you’d like to hear about how we can help you with your move, never hesitate to reach out. 

Photo of The Month – January

Our first showing of the new year led to the first accepted offer for happy clients of 2024! Obviously we’re always over the moon for our clients when they are successful in an offer, but one thing that surprised me was how fascinated some of you were on social media. My instagram messages blew up with questions about the pictures we shared. 

Yes! There are genuinely ‘luxury’ condos being built in Langley City. This building in particular is always one I’ve had my eye on. It was built by a developer who had already retired but still held the land – it was a bit of a passion project for him, and he made all the right decisions. The fixtures and finishings are absolutely top class, there are 10ft ceilings on every levels, the units are huge, there’s a concierge service for the residents – everything has been so well thought out. A bonus was that at 3 years old the 5% GST was already paid but the home still had a warranty in place. Best of all worlds! 

Obviously we can’t disclose any confidential information but what we can say is that the offer reflected an opportunity well capitalized on. The luxury sector, whether it be condos, townhomes, or single family, continues to provide opportunity. If you’re interested in a luxury purchase in the future, we’d be happy to discuss where we see the strategic moves. 

2024 – Sweater Scores

Back by popular demand, we’re making our annual predictions on some factors that will impact the market, which started last year with some ‘impact factors,’ later called ‘sweater scores’ by Alex McFadyen of Flow Mortgage Company! This is less a discussion of whether the market with ‘go up or down,’ but more an outlining of some of the influences, primarily top-down driven rather than fundamental factors like supply and demand – which I’ll touch on briefly at the end. I’ll start with a text summary and you can find the podcast links further down.

Interest Rates – 9/10

We’re starting with the most important factor in the real estate market again… interest rates! I’m giving this one 9 sweaters out of 10, the market rises and falls on interest rate action. To refresh your memory, this was last year’s commentary:

The recent pull back in real estate is seemingly disproportional from fundamentals, with interest rate hikes by the Bank of Canada bearing the bulk of responsibility for the volatility we’ve seen. Following years of ‘cheap money’ inflation ‘ran hot,’ the Bank of Canada are trying to combat this with surging interest rates. Unfortunately I agree with a number of thoughtful economists who hold little faith this will do enough to return us to the BoC’s mandate of 2% inflation when the Federal government continue to announce new projects of hundreds of millions of dollars on an almost daily basis.

In the words of CIBC’s Benjamin Tal, “If you look at spending, it’s rising a bit too strongly for my taste. If you have fiscal policy rising and monetary policy trying to slow the economy it’s like putting a humidifier and dehumidifier in the same room and seeing who is going to win… If you go back to the 1980s when they won the war against inflation, it didn’t happen until fiscal policy joined the battle.”

Evidenced by the constant announcements of new spending initiatives, fiscal policy has not yet ‘joined the battle.’ As a result, these hiked interest rates have done little to cool inflation, have hindered affordability, and have cost average Canadians hundreds of thousands of dollars in home equity. More and more Canadians are realizing this so I do anticipate more pressure put on the BoC to slow the hikes, with them at least plateauing by mid-2023. 

Government spending has still not been brought under control and inflation has not returned to the BoC’s mandated levels. Even Tiff Macklem at the BoC finally raised the flag on government spending a month or so ago as budgets were being announced. Consumer spending has however dropped, and the pain has been felt by many. The last three interest rate announcements have been holds, as predicted above, and there’s a good chance we’ll begin seeing some minor drops in 2024. Fixed rate mortgages have already begun pulling back. 
With this likelihood, I do anticipate an early and somewhat hot Spring market. Yes, the rates impact purchasing power, even moreso we’ve learned how much they influence sentiment – and that’s the real market driver here. With more and more consumers feeling like the hikes are done for the near-term I do believe we’ve already hit an interim-low as November saw an uptick in activity that will continue after the December market hibernation. 

Inflation – 8/10

Obviously inflation and interest rates are tied to one another, and we’ve learned that it’s a two-way street. We all know by now that the interest rates were hiked to ‘help combat inflation,’ but we’ve now had a year experiencing that the interest rate hikes also cause further inflation, at least in the short term, as the cost of borrowing is passed down to the consumer at all levels. As Tim Di Muzio has said,

Debt is an essential element of modern economies and is a significant operational cost. Modern capitalist economies rely on credit to function: most businesses and households require business loans, mortgages, and other loans to function, and have operational costs which include servicing these loans. As witnessed during the 2008 Global Financial Crisis, if trust in the future of the economy is jeopardized (and by extension trust in loans being repaid), credit freezes up, bankruptcies and bailouts begin, and recessionary conditions follow. Limiting credit or refusing to extend credit can lead to devastating consequences for individuals, families, businesses, and even governments. We can think of debt (for better or ill) as the backbone of modern capitalist economies and the servicing of debt as a ubiquitous operational cost… How do higher interest rates affect mortgage holders? Most mortgage holders know that the cost of servicing their mortgage (or mortgages in some cases) will go up. This in turn pushes the cost of housing up for renters, first-time home buyers, and those on adjustable interest rates or who renew their mortgages during a rate increase.

You can probably see why we’re in a bit of a predicament here. The cost of money continues to climb and so the cost of everything else does too. This has a dampening effect on demand. As I said above, I expect us to have hit an interim-low in the market, and that demand will climb, but I don’t expect it to explode as we’ve seen in prior years – people are simply suffering too much with the cost of living. For many of us, the illusion that life will always be comfortable has come to an end, we’re generally going to be more cautious and conservative moving forward. That means we may see less volatility in the coming years, which although bad for investors is primarily a good thing for homeowners simply looking for stability regarding their own principal residences.    

Short Term Rental Ban – 5/10

As many of you know, the Government of British Columbia recently announced new rules for short-term rentals. As with last year’s unilateral announcements on rental restrictions and age restrictions on strata properties this won’t have a big impact on the market as a whole, outside of some very specific neighbourhoods (particularly in Kelowna), but it will impact specific citizens negatively who had purchased in short-term rental specific neighbourhoods or complexes. Many owners will not be able to cashflow their investment properties as long-term rentals so there will be a selloff in these areas, with some owners losing sizable equity in the process. As they are now unattractive holdings for the current owners they are unlikely to be attractive investments for new landlords that can only utilize them as long-term rentals, so they will most likely be lost to the rental stock – creating even less supply. 

This is another announcement that may make for good headlines, but really benefits very few and disproportionately penalizes some who tried to make responsible investment decision or used short-term rentals as a way to afford a vacation home. At the personal level, many of you will know we’ve AirBnBd the same home on the beach in Sechelt for 5 years, making many happy family memories. That home is worth around $2.4m, certainly not something we could afford to purchase, but we enjoyed visiting. With Sechelt’s municipal restriction and now the new Provincial rules that home will now be used less, meaning fewer tourists, a slower economy in the area, lost jobs, and no increased rental availability as long-term tenants are unlikely able to afford the high rent that would be required to carry the cost of the home.   

Land Use  – 3/10

I admitted last year, “It’s a shame that this requires a little more ‘political talk’ than a usual market, but I’d be failing to advise my friends and clients well if I didn’t at least attempt to outline the interventions and their potential outcomes moving into 2023 as they remain a significant influence in our markets.” Even I didn’t expect the latest unilateral move from Government of British Columbia as they restricted debate before passing Bill 44, which the Vancouver Sun described as “seizing zoning authority from municipalities and transferring it to the Province.” These kinds of bills have unfortunately become par for the course in recent years, as discussed above and in last year’s ‘sweater scores’. 
The zoning changes that will impact the largest number of people are summarized by the Government below:

Three to four units of small-scale, multi-unit housing must be permitted on each parcel of land, if zoned exclusively for single-family or duplex residential, which are: 
– Wholly or partly within an urban containment boundary established by a regional growth strategy, or 
– Within a municipality with a population greater than 5,000 and is wholly or partly within an urban containment boundary established by an official community plan, or 
– In a municipality with a population greater than 5,000 that does not have an urban containment boundary

Requirements will apply in single-family and duplex zones that already allow a secondary suite and/or an accessory dwelling unit (ADU).

The minimum number of dwelling units that must be allowed by parcel size are:
– A minimum of 3 housing units on parcels that are 280 m2 or smaller
– A minimum of 4 units on parcels greater than 280 m2
– Some exemptions apply

While I agree that we do have a ‘missing middle’ in housing in the Lower Mainland, mid-density living between large condo developments and single family homes, seizing this authority and overruling municipalities who have spent decades on city planning (granted, not always efficiently) does concern me. While this won’t make too big a difference in 2024, and may not in the years to follow if revoked by future governments or legal action by the municipalities, if it is allowed to remain this move will have implications across the board. Already we have infrastructure challenges in many of our cities, with limited transit, schooling, medical facilities, parking, etc. There will also be property tax implications for some, as assessments are calculated on ‘highest and best’ use. 
Generally, I hope this move will be a shot across the bow of municipalities and that they will regain zoning authority with more initiative to drive progress. It must be pretty painful for Municipal leaders to see decades of Official Community Plans (OCPs) and Neighbourhood Concept Plans (NCPs) overruled like this. We definitely need more density but it needs to be more nuanced than this kind of carte blanche legislation.

Podcast

Now, for this year’s podcast, I think Alex and I would both admit to being a little over-caffeinated so there’s definitely a little more rambling than we usually offer! Oops! We share our expanded thoughts on the above, and we also discuss a few other topics including the danger of the ‘eat the rich’ mentality toward ‘mom and pop landlords’, as well as why we’re both considering real estate purchases in the near term – something we’ve previously differed on. 

Spotify 

Apple 

YouTube

The Fundamentals – Supply & Demand

The ‘sweater scores’ have generally featured top-down externalities on the market, but I wanted to touch on our expectations for the basic fundamentals to wrap up, supply and demand. 

Supply remains somewhat limited, with many people determined to stay in place while they still have their lower interest rates locked in and/or wait for rates to drop. Some of those mortgages may be up before they’re able to renew at rates lower than they currently are, and some may sadly be forced to sell. I do not expect that to be a large portion of the market by any means though, and a ‘wave of foreclosures’ coming is highly, highly unlikely. Developers have slowed, so even new inventory will remain relatively low – they are struggling to sell right now, so we’re seeing some developers choosing to rent projects. Other projects are being mothballed entirely as developers fail to hit financing thresholds, meaning that their construction loans may be withheld, leading to the development stalling. The resale market will still have some supply though as folks continue to choose to sell for a variety of reasons – upsizing/downsizing, work transfers, marriage/divorce, death, etc. In short, there will be enough supply but not an overabundance. 

Demand will likely climb as sentiment rides higher on the back of further interest rate holds and even drops. The last three years have really cemented my belief in the madness of crowds – most consumers move as a crowd, moving to the sidelines when everyone else seems to, and then diving back in when their peers do. Now that I’ve seen it play out in a few cycles I have to admit the predictability and dependability of that movement. With that in mind, I fully expect not a full stampede, but a piling on of consumer demand as purchasing power is restored and sentiment lifts. We also continue to see record levels of immigration and asylum, increasing demand for housing even further. Ultimately, we continue to live in a desirable place in the world and people continue to dream of owning real estate here.

Finally – My Gut

I’ve done this long enough now to have developed a degree of intuitiveness, and that intuitiveness suggests we’ll have a higher volume year in 2024 than in 2023, with prices leaning toward appreciation rather than the relatively flat performance we’ve seen this year. The uptick in activity over November suggests to me we’ll see an early Spring market, and that by mid-January we’ll have a good sense of where the market is heading. If the Bank of Canada announce another hold or even a rate drop on January 24th I expect a return to the kind of market we saw between February and May of 2023, a low to mid-level Sellers market that affords buyers the opportunity to still make reasonable offers. We’re not going back to sales ratios in the region of 100% again until the rates drop substantially lower, in my opinion. 

As always, if you’re interested in discussing how any of the above may impact your situation specifically, we’d love to hear from you and will happily free up the time to discover some answers together. Never hesitate to reach out directly to me at david@davidsmithhomes.ca or 778-246-4344.

Something To Do By The End Of The Year – First Home Savings Account (FHSA)

If you are a first-time home buyer, or you know one, this is an important nudge to setup a First Home Savings Account (FHSA) prior to the end of the year, even if you don’t intend to add anything to it immediately. This will allow you to utilize this year’s $8,000 annual contribution limit, with another $8,000 available next year, and in the years following – up to a total of $40,000. 

If you’re not yet familiar with the First Home Savings Account all details can be found here and your account should be able to be setup at almost any financial institution in Canada. If I were a young buyer currently, I’d probably lean toward TSFAs, then the FHSA, and finally RRSPs in the unlikely event I had any savings left! Everyone’s financial situation is different though, of course, so please speak to your financial advisor and/or accountant about the FHSA and how it may work for you.