Patience usually pays off.
Good things normally come to those who wait.
When it comes to the Metro Vancouver real estate market, windows of opportunity can open and close faster than expected, and we may have just seen one close. After the implementation of the government-imposed stress test which cut buying power from home shoppers significantly in January of 2018, the market continued to remain afloat before slowing to a crawl in the latter half of that year. Industry experts predicted this to be a prolonged lull that would see prices soften for the following eighteen months to three years.
As advised by the media and many in the real estate sector, buyers pulled back and played a waiting game from August 2018 until the late summer of 2019. A shift began to occur when this past summer came to a close. Those who had been patiently sitting on the sidelines began searching for their next home after seeing year-over-year housing price decline between 5% - 10%. That gradual return to the market by buyers picked up steam much faster than anyone expected. While the winter months are traditionally known as a slower time in the real estate market, that simply wasn’t the case in 2019.
The thing about the bottom of a market cycle is that there is no way to know exactly when it is until it has already passed.
As seen in the first graph, prices are declining and people are taking notice. Buyers stay patient and hold off from purchasing as they assume prices will continue to slide. During this cycle, buyers are hopeful to see the market hit a low point that they feel they are getting good value at.
Many buyers try to time the market by having expectations of continuing decline. In reality, a market may have already hit its ultimate low point. Waiting is often fuelled by a desire to get the best deal possible and the fear of going against the crowd by purchasing when no one else is.
This is where a market surprises most. While the majority of buyers are waiting for the bottom, others with different expectations of the low point have begun purchasing again. This brings the decline to an eventual halt. Market prices begin to pick up quickly as more buyers re-enter the market. In this phase, many individuals begin buying in fear of missing a softened market. This effect ripples through the market and causes rapid price growth. As you can see, prices are already on their way back up and the bottom of the market can only be seen in hindsight.
Entering 2020, it’s safe to say that buyer confidence has returned. It appears we are headed towards a year in the market that may see all of the value lost in the brief downturn regained sooner than later. In fact, there have been cases of the frenzied style of demand that buyers were subjected to through much of the middle of the last decade. If the early part of 2020 indicates what’s to come, look for property sellers to plant themselves in the driver’s seat in the transaction process. Sales tactics that generate bidding wars and rising prices may once again become the norm.
As it has in the past, this corner of the world has defied the beliefs of prominent economists, statisticians, and forecasters. In other words, the Metro Vancouver real estate market is showing signs of being itself. If getting into the market is on your horizon, there is an old question and answer that may serve well as a guiding principle:
When is the best time to buy real estate?
Yesterday! But Today is always better than Tomorrow.
Looking to make a move in 2020? Feel free to reach out to me anytime at adil@adilkhimani.com
Thank you for reading,
Adil