As we come out of the recent 3 months, that feel more like 3 years, we are starting to see a shift back to a somewhat normal life. The phased approach to reopening the economy, numbers in the virus coming down, and generally a higher level of comfort with stepping back into day to day life.
So what can actually happen to Vancouver Real Estate from here?
Based on what you are seeing, hearing and reading, you could be in a couple different camps with what you believe is going to happen next: (Note - These examples are not exact, they are just loose possible stories surrounding each particular belief. It’s the outcome that we’re referring to in particular)
- You could be thinking the pandemic is not over. Until a vaccine is released, things will not rally so the market will continue on it’s same/similar trajectory which will keep prices steady and no longer rising, as opposed to before the pandemic. Infections are still taking place, especially with the rioting/protests, there will be a surge in cases. Or something similar …
- There is a second Corona wave coming, along with a recession. This is just a ‘dead cat bounce’. Prices will reduce further. The proverbial ‘Falling Knife’ metaphor. Currently that knife is falling, so don’t grab it.
- The worst is over, and as we start to take steps back to the ‘new normal’, the numbers will start to move upwards, and we’ll see the signs of recovery.
Points 1 and 2 are essentially the Neutral and Negative view of the market. I use the word negative, not wrong, as I’m referring to the belief the market is still, and continues to be in a negative position and coming down.
Point 3 is the Positive. The belief the market has seen the worst, positive numbers are coming, therefore creating a positive movement upwards as we progress in 2020.
Everyone is entitled to their own opinion of course. So let’s look at each of the scenarios and determine what they would need to look like.
Scenario 1 - In order for this to happen, we essentially need to stay the same as where we are now. Although the numbers were very low in April, we were sitting at around 11.8% as a sales-to-active listings ratio. Between 12% and 19% is a balanced market, which is where scenario 1 has us playing. This requires another couple months of familiar activity with inventory and demand staying relatively similar as we have currently seen.
Scenario 2 - This would need to see the figures keep on reducing and putting us below the 10% sales-to-active listings ratio. Typically this would involve a higher level of inventory available, without the demand to meet it. This on a continuous basis, is what would be needed to see this market play out. Another 3 or 4 months would meet the ‘sustained period of time’ required to induce downward pressure on the market.
Scenario 3 - Demand picks up beyond inventory. Now inventory is GOING to increase regardless, but the difference in this one, versus the other scenarios, is demand itself will exceed inventory. This is where we were at pre covid. This causes demand to outweigh anything new coming to market, and changing our sales-to-active listings ratio closer to 20% and above.
So which one is GOING to happen? Well we can’t answer that right now. All we can do is see where the numbers are sitting currently and the trend we have seen thus far. Beyond this, is just our predictions based on what we hear, see and can tell from previous years.
Right now inventory is increasing. I think this was a given regardless of which scenario you are in, the question that defines your scenario is your thoughts on buyer demand and what it will do.
Beyond this, there are a number of factors in play. For one, Spring is traditionally one of the busiest times in Vancouver real estate. As that was prime Covid-19 time, will that busy time just be later as restrictions start to ease? Another being the state of emergency - once this is lifted and tenanted properties are more susceptible to being sold, will this increase transaction numbers? These are just a couple of the discussions being had right now, there are a variety of others too - recessions, second waves, stock opportunities, forced financial positions and so on.
We’ve highlighted our opinion on the matter a number of times these past couple weeks, so in the spirit of not repeating ourselves, feel free to reach out to us if you have any questions on that. Our opinion is not the topic of this particular blog. To use the age old adage “only time will tell” could not be more true!
Thanks for joining us again, and let us know your thoughts on what YOU think is going to happen in Vancouver real estate next?
Until next week!