This market is just getting out of hand. It seems like we’re setting new records every month, things just keep getting hotter, and multiple offers are becoming the new normal.
To really put this into perspective, flashback to February 2020 with us …… Covid was not in full force, we could still see friends in person, and travelling was still something we all actually did! But also it was this time last year, we were discussing how the market sales had increased 44.9% from 2019. At the time we were all extremely hyped and the market was hot, hot hot. Well turns out compared to today, back then the market was only lukewarm. As of this month, sales increased a whopping 73.3% further when comparing February 2020 vs 2021. Let that sink in for a minute. 73.3% FROM AN ALREADY 44.9% THE YEAR BEFORE!!!!!
That. is. Crazy. Just outright crazy!
So let’s just add some gasoline to the above paragraph. Inventory is down 9.1% year over year. In fact inventory is down 21.2% when looking at the 10 year average. This shows you the extent of the market we are facing.
So the important question next:
“What does this mean for real estate prices?”
Let’s not mess around here. Plain and simple. It means they are going up. Higher. Increasing. Rising. Growing or whatever other word you can describe ‘UP’ with!
So now you say “I get the market is busy, but why does that mean prices are going up the way you say they are?”
Well I’m glad you asked. Pricing is typically determined by something called the Sales-to-Active Listings Ratio. When this number is below 12% for 3-6 months, this puts pressure on prices to come downwards. When this number is between 13-19% for the same time, it balances the market (none/very minimal price fluctuations), and when this number is 20% plus, it puts pressure on prices to move upwards. Well we’re currently sitting at a 44.6% ratio. This ratio is in line with 2017, and we all remember how crazy the market was then! You look at our 3 month previous ratios, and we’re always in the high 20’s/mid 30’s.
Well those are the statistics, but what is the market actually doing right now when you’re in the field. First of all, you don’t have the inventory to pick from when you’re a buyer, and secondly, multiple offers and over ask sales prices are making a storm of a comeback. 82 of the 127 detached homes that sold in February on Vancouvers’ Eastside, sold for above asking price. That’s 65% of detached home sales. Don’t forget, that’s just homes sold above asking price, plenty of the ones that didn’t go above asking price were in multiple offers and sold in a matter of days (8 days was the median day on market for this product/area in February.)
If you want to be successful in this market, forget needing to be two feet in, you need both feet, hands, head, and everything in this! Be prepared to act, and to act fast. Get comfortable with multiple offers AND with losing. The biggest mistake people make right now is fear of action. Paralysis by analysis. They decide to wait until the market has “cooled down” before buying. Well let’s say that is at least another 6 months from here, with a market home price that increased an average of 2.6% vs January 2021, that’s a potential 15.6% over 6 months. So yes, good decision, your desire to wait on purchasing your $1,000,000 home has cost you $156,000. If you’re buying a $3,000,000 home, that’s an additional cost of $468,000.
If you’re out there fighting the good fight, we salute you and wish you the best in your home purchase journey. Sellers, you’ve waited long enough for this market, so take advantage of it.
As always, we are here for all your real estate questions and needs. You can contact us both on the details below!