THAT CRAZY MARKET!
A quick look at the chart on the right gives you a strong indication that the market is at a record level of activity. With a list to sell ratio of 68% it is higher than it was in the push of 2015-17 and higher than the push of 2005-07. This level of activity creates a very difficult market for the buyer as they struggle against multiple competitors to simply buy a home. On the other side of the deal, the seller is inundated with dozens of viewings each day as they move toward offer presentation day where they sift through many offers to find the one that is best.
Realtors® on both sides of the deal are working very hard to get the best for their client and trying to give sane advice in an insane market. When a listing gets 12 offers, the listing agent has a fixed set of protocols and documents to work through to ensure things are done properly. The Buyers and their agent know that if they don’t win, they’re back the following weekend to do it all over again on another property. 11 buyers and agents face this outcome. The stress is significant for all involved. Frankly, a balanced market is a much better market to work within for all involved.
The big question is how long will this last. This market will continue until supply increases or demand lessens. With sellers worried about being able to buy, there is reticence to listing first, so this shortens supply. New construction is held up as well because local governments are backlogged (due to Covid apparently?) and permits are taking much longer to obtain. There is also a shortage of developing land, again due to delays.
On the demand side, interest rates are at historic lows, though they are starting to rise in the last few weeks. Unemployment is not the concern it was last year and generally there is optimism. Then add in to the consideration that immigration has been curtailed this last year and only a portion of what we typically see in a year has actually come to the Lower Mainland. As Covid rules relax immigration will ramp up adding a bit more pressure on housing.
The next thing to happen is that prices reach a point where buyers cannot borrow any more and the number of offers decline. The Buyer then turns to a less expensive alternative and we will see the townhomes accelerate first and then the condo market will take off. This is already starting to happen with existing condo inventory selling off the market, again reducing inventory and pushing prices up.
Navigating all these issues, both on the selling side to maximize the eventual selling price, and for buyers working a strategy to get the best possible outcome in a multiple offer scenario, involves planning and experience. Frankly, that’s what I do and have done for many years. Knowledge of the Rules and Procedures combined with experience and success in all types of markets, that’s where I shine for you.
During the recent federal election I posted the party platforms on the housing issues in our current market. Each party had a plethora of possible or pathetic proposals. Since then the Provincial NDP has announced a number of other possible changes in an attempt to affect the current housing market. Most recently the concept of an additional tax on houses valued in excess of $1 million was touted and then backed by CMHC.
Almost all these ideas are bad and will have long term negative affects on the industry and your principal dwelling investment. They are also not applicable or necessary in any of the other types of market we have experienced in the last 20 years. This current over-heated market will change, and likely before the governments implement their strategies to affect the market.
On the Provincial side it has been proposed that the buyer have a right to a 7 day walk-away from any Contact of Purchase and Sale for real estate in BC. This option exists in new construction now and it works because the seller/developer is not relying on any specific sale for timely action on another transaction. The developer is there selling a great number of units over a lengthy period of time.
For the individual homeowner a sale of a home is typically tied to the purchase of another home and decisions on the purchase are governed by the results of the sale. In a normal market a buyer makes an offer with a number of due diligence conditions in the terms to be satisfied within a 7-10 day window. There is a principal at law that the buyer must make best effort to fulfill those conditions. A walk-away clause has no obligation on the part of the buyer and the seller is held hostage for the 7 day window while their opportunity to proceed on the other side of a move is held up by the walk-away clause. There is also nothing to stop a buyer making several offers on homes, tying them up for 7 days and then later deciding if they actually want to proceed with any of the agreements.
In the multiple offer trials we see now, a buyer will try to enhance their offer buy overriding the walk-away option and although you cannot waive a statute right, they could pay a non-refundable deposit directly to the owner to show binding intent. Then if they walked away it would cost them the deposit paid. In this heated market buyers are looking for a competitive edge to win the bid for the home, and the government cannot curb human drive and ingenuity.
As to the recent proposal of a tax on homes valued in excess of $1 million, it’s just the dumbest idea in a while. If you own a detached home in Langley it is now valued in excess of $1 million. This means most detached homeowners in the Lower Mainland will be receiving an additional tax. The Municipal Tax program already adds a greater tax to those with a more valued property. It is a reasonably equitable method of taxation. Yet again, with this suggestion the Federal Government is showing how completely out of touch they are with the constituent.
Both governments need to hear from the homeowner that these ideas are not just foolish but hazardous. I encourage you to contact your local MLA and MP and let your opinion be measured.