2012 ended with both buyers and sellers waiting for the other shoe to drop. There was sustained talk in the media and blogosphere about a bursting real estate bubble. In anticipation of a price crash, buyers played wait-and-see, hoping that what had been out of reach would become affordable.
Benchmark prices did slide from their late-spring peak, but not in bursting-bubble fashion. (See the year-end market reports for REBGV and FVREB for details.) Sellers either took their homes off the market when they didn't get the prices they were hoping for, or they didn't list at all. For anyone who did want to buy, there was little new inventory to keep them interested from October on.
So who knows what's next?
We surveyed several local real estate experts to see how they think the residential real estate market will go during the spring buying season and through the rest of 2013.
Quoted in this article: David Rishel, Managing Broker, RE/MAX Little Oak Abbotsford, Mission, Surrey, Langley, with offices throughout the Fraser Valley Real Estate Board area
Glenn Dennis, Principal, Glenn Dennis Group, RE/MAX Colonial Pacific Realty Surrey, White Rock
Faith Wilson, Principal, Faith Wilson Realty Group Inc. Vancouver West, Vancouver East
Richard Laurendeau, Managing Broker, RE/MAX Westcoast Richmond, Vancouver West, Vancouver East
Ozzie Jurock, real estate investor and publisher of Real Estate Insider, Real Estate Outlook 2013 report
Biggest surprise in 2012?
Kevin Skipworth:I was surprised by the resiliency of prices given the lack of activity. It's because of strong fundamentals in our economy.
Faith Wilson:I don't think there were a lot of surprises. On the West Side we certainly saw that the market was peaking, so I don't think it was a surprise to understand that the market was going to change and come off those historical prices. I guess if there was any kind of surpriseand it wasn't a big one it was that in the third quarter the market was really quiet.
Richard Laurendeau:It was not a surprise that the marketwhich had been very good in terms of appreciation and units of sales for so longdecided it was time to take a little back. We knew that it had to happen the question was when, and it comes as a relief that it has arrived so that we can work through it and move forward again.
David Rishel:Despite the prognosticators and mediathe bursting bubble and so onour sales numbers were up 19 per cent over 2011, so we certainly bucked the trend of what the predictions were saying was going to happen, at least in our market.
In Abbotsford we have lots of homes from $600,000 to $1.3 million, and those homes were selling quite well in spring early summer. It could have to do with the fact that the other areas that were known for high-priced homes fell out of favour because they got quite high in price compared to the value they were offering.
What will happen with sales?
Ozzie Jurock:In general terms I think this year will be a slow year. If you compare this January against last January everything looks fine. Sales were down 14 per cent. But if you measure against Jan 2010, we're 30 per cent down in sales. In Richmond we're down 22 per cent in sales, and we were actually 54 per cent fewer units sold than in January 2011. So I consider this coming year to be sideways to lower on the sales front. I think that most sales will take place in the first four months, and I do believe we'll see some Chinese buyers back around Chinese New Year, but then from about May or June we're going to we'll tail off much as we did in 2012.
Glenn Dennis: All indications this spring are pointing towards an increase in home sales in the South Surrey White Rock area. I believe many of the buyers who were sitting on the sidelines in 2012 will enter the market. They have now come to the realization that the market is not going to crash.
Kevin Skipworth:I would expect to see an increase in the 5-to-10 per cent range for the Lower Mainland in general. There is a degree of pent-up demand out there from people who want to make a move but have held back. We've seen better activity this month. Buyers are still cautious, but there's a little more desire from people who want to engage with the market. Once buyers engage, the sellers become buyers. I see improvement in that cycle.
David Rishel: I think we'll see a market very much like what we had in 2012. If you're optimistic there are all sorts of signs right now that it's improving. First of all, there are lots of buyers. Our impression is that they were sitting on the fence due to the media reports, wondering when the prices were going to fall. And we experienced what I would call minor correctionsat least 3 per cent in our market areas. The big drops or the bubble bursting didn't happen. So I think the buyers are realizing that the sellers aren't going to lower their prices too much anymore.
We're experiencing multiple offer situations regularly when houses are priced well. There are buyers out there for sure.
Faith Wilson: Overall we're going to see what we've seen in the first part of this month. Sales are down a bit percentage wise. That'll probably continue. And I think that the bulk of our detached sales for Vancouver West will certainly happen in the next few months: February, March, April, maybe part of May. That will be our most active market.
The condo market's been pretty flat for a number of years now. There were a lot of three- and five-year mortgages that came out three and five years ago. When those turn over we could see an increase in activity in the condo market, particularly in downtown Vancouver. That'll churn the market somewhat, because those parties, if they're moving up, will move the next people up the market.
What will happen with prices?
Glenn Dennis: Prices will remain steady (give or take a few per cent either way) in 2013. We are still having strong foreign investment in South Surrey White Rock, which is supporting the prices.
Kevin Skipworth:I think it's going to remain flat. I think we saw the correction, and across the board we're going to see flat pricing for the next year. Cameron Muir (of BC Real Estate Association) said, "Flat is the new up."
Note: Here are the BCREA predictions for unit sales and prices in 2013 and 2014.
Ozzie Jurock:When we look at our prices, we always measure year over year. But if you went back to May 2011, the average price is down by 11 per cent. So I think we've seen the highs, and I also think pricewise we'll be sideways to down for the year. It's not that we're going to have price declines. We've seen price declines.
As an investor, I look at markets from a timing perspective. Long term I'm bullish. But I think this year is going to be a slower year because of the timing. We have a tired consumer, or consumer that's a little spooked and stays on the sidelines. And in the new condo sector we have overbuilding, so the cycle, the timing the trend all goes against us.
Faith Wilson:You can look at overall numbers, but I really think it depends on where you're talking about. For example, when that West Side market was peaking and coming off, families, started looking for valueand I'm not talking $2 million, I'm talking $1.2, $1.4 millionand some of our folks were taking a bit of equity out of their West Side home and going looking on the East Side or the North Shore for areas of value.
Some neighbourhoods may still come off or may go up individually. But generally I would say that we've had the bulk of our change in sale prices. Buyers are really negotiating aggressively right now because they know it's a buyer's market. So prices still may go off a bit, probably sometime in the middle of the year. People are savvy now and they're watching their pennies and they know it's a stronger market for buyers and they're going to take advantage of it.
Richard Laurendeau: There are many factors to consider, but those areas that gained the most are usually the ones to pull back the most. Those that did not are less likely to experience the same degree of pull-back. In all cases, this market provides opportunities for buyers who were waiting for just that, a pull-back in the market. Will it pull back more? I doubt it. I suspect we've seen most of it now and we'll see those first time buyers and move-up buyers see the advantage and take action in 2013.
What will be hot?
Richard Laurendeau:Given the opportunity for the first-time and move-up buyers, I suspect that the homes that appeal to the move-up buyer will be the best position in 2013.
David Rishel: Any neighbourhoods where home prices are between $300,000 and $500,000. Higher-priced stuff is okay, but it's not as robust as the lower-end market. The typical buyer is the move-up buyer, who has a condo or townhouse and is selling it and moving to a house. Single family has always been the most desirable product and there's a lot of value here.
Our condo market is quite saturated. We've got a huge supply pretty much anywhere in the Fraser Valley right now. It's a challenge. There's a lot of competition between the condo owners and the new condo developers to get their stuff sold.
Faith Wilson:People are looking for value. If you're a family with kids, you're going to look at good neighbourhoods that will give you that.
Good neighbourhoods on the North Shore and areas of the East Side will stay strong. And then what will happen is that buyers will start to come back to the West Sidewhich they are right nowand they're going to ask, has the value shifted enough that this will make sense for my family?
So entry level on the West Side looks good, around $1.5 million to $1.6 million in Dunbar or Point Grey. That entry-level price point is important for builders and it's important for first-time buyers.
Glenn Dennis: Single family detached in the Elgin Chantrell area. The closer the homes are to the high school the better. We continue to see many people moving to the area from other parts of Metro Vancouver as well as new immigrants. The South Surrey White Rock area is a fantastic place to live. The public schools are highly ranked by the Fraser Institute as well as having top ranked Southridge private school. Many buyers cannot believe the value they receive when they are purchasing a home versus other parts of Metro Vancouver.
Ozzie Jurock:The areas we like for the investors would be:
Port Moody. I love Newport Village. Look at the condominiums there in the $260,000 to $290,000 range. There's no bridge, and you can still buy a 4,000 square foot home there for under $900,000 In fact with some of the price drops there, you can buy spectacular houses with spectacular views for the same price as a one-bedroom condo in Vancouver.
Coquitlam, because of course the Evergreen Line. When you look at the condo sector there you have lots of opportunities for the buyer
New Westminster. We have low prices for entry level condos, there's the Skytrain, improved waterfront, retail upgrade you can find condos at about $180,000. When you consider that you can buy those at 5 per cent down$9,000 dollarsyou can move into your own place and your monthly payments are under 1100 dollars, so we kinda like New Westminster.
We still like Burnaby, but we think the condo market will be overbuilt in Metrotown.
In the Fraser Valley we like Abbotsford, and Surrey has great upside, particularly from an investor point of view. I mean you can get condos for $120,000 with five or six thousand down. Very few times in our lives has it been as cheap in terms of monthly payment, because interest rates are still very low.
For instance in 1990 a five-year term was 13.5 per cent. So $100,000 took you $1180 to service. Today you can go about $400 for that. So it's sort of mind boggling when you think "How the heck did I finance property back then?"
David Rishel: I think we're going to get a push in investors because the values have got to the point where people are looking for the deals. We're getting a fair number of folks saying, "Hey I want to buy a house and fix it up, rent it out and build a portfolio." Even the young peoplethey're very savvy. They're not looking for the quick buck; it's long term investment. Buying homes, fixing them using the equity to buy something else, and in the lower-priced areas... we're seeing a lot of that.
Ozzie Jurock:We're telling people, "Go make offers. Developers actually will love to see you. Real estate agents will actually have time to sit down and talk to you and will call you back it's a good time."
There's always this crazy feeling we have that a good market is when ten buyers wrestle each other to the ground and one emerges victorious paying $100,000 too much.
A good market is really when you have the time for you and your family to create that great environment for yourselves where, with a minimum down payment and maximum leverage, over time, even if prices never go up, you create an asset for yourselves.