With the third successive month of slumping sales in Vancouver, people are talking about the housing bubble again. Prices have only decreased slightly, but it still has homeowners worried that their value has stretched as far as it can go, and buyers are sitting in the weeds, waiting to make their move. The question is, how long are they willing to watch prices fall before moving in? Will the market suddenly implode, slowly deflate or bounce back? Is Vancouver a bubble or a ball? Let’s look at the three theories from the perspective of a Vancouver REALTOR®.
Theory One – The Vancouver housing market is a bubble, and once it pops, that pretty rainbow streaked illusion is going to vanish in an instant, leaving a lot of homeowners all wet, and possibly even underwater. Some skeptics say that we could be looking at a California-style 2008 housing crash, with prices losing 50% of their value overnight, and maxed out home equity loans driving owners into bankruptcy. Nearly 50% of the houses in Canada are considered high-risk investments.
Here’s why what happened down south most likely won’t happen here. 1. Canadian lending regulations are much more stringent. 2. Foreign investment is a bigger factor in Canada than it was in the States. Many of the properties in Vancouver were paid for in cash, with long-term investments in mind. Vancouver homes are safe havens for overseas wealth, more than short-term commodities to be flipped.
Theory Two - We’re in for a slow sink, more like a balloon leaking air, than a bubble. Even the most optimistic analysts of Canadian real estate say there is going to be a correction in the market, and it is not unrealistic to see a 20-25% drop in prices over the next few years. We have seen a 100% price increase since 2000, and currently Vancouver stands at 91% unaffordable. It was bound to correct a little, but a full on explosion is more likely going to be replaced with a gradual deflation…. And if you look back as far as the 1960s, every time the market has gone down, it has rebounded higher on recovery.
Theory Three - We are back in a buyer’s market. There is no bubble. Vancouver will keep bouncing up and down, and once this slump levels out, we’re in for another buyer’s frenzy. It could happen next month, it could happen next week.
The surest thing you can do is to keep your Vancouver REALTOR® close. If your property is in her file, she can know exactly when the buyers are coming, and get you ready. If you are looking, she can tell you when to strike, to maximize the buyers’ market we are currently in…. this market may not be optimal for those who bought only recently and want to sell but if you bought a while back, you have done well; if you are buying in, it is the best time in 10 years to do so; if you are upgrading to a more expensive property, this is the type of market you want….if you would like to know how this particular market affects you, please contact me for a personal consultation or free market evaluation. Bottom line-don’t try to time the bottom or top of the market or it will likely bite you!
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