It is a common saying that fear can stop you in your tracks. This statement, while not usually associated with real estate, seems strangely fitting given recent trends in the Vancouver housing market.
Like frightened forest critters caught in the headlights, some prospective home buyers, fearful that the drop in home prices in the Greater Vancouver area over the past year is solid indication of a more substantial price decline in the near future, are postponing purchases.
Consumers are reluctant to take the plunge and finally buy the house of their dreams because they are fearful that they would be buying on the high end of the market.
No Bargain Bin Finds
According to a February 18th, 2013 statement by Cameron Muir, chief economist at the B.C. Real Estate Association, some prospective consumers in the Greater Vancouver area are “taking a wait-and-see approach in anticipation of a deflationary spiral”.
Like the trend-seeking shopper who purchases the season’s must-have shoes, only to see that they have been marked down and tossed in the clearance bin a mere few weeks later, housing consumers are concerned that if they buy now, they will be disappointed by the amount of money they could have potentially saved, had they waited.
These fears are, for the most part, unfounded. Mr. Muir told The Globe and Mail in February that he doesn't expect a substantial drop in Greater Vancouver home prices will not occur. He says that this year’s market prices may, on average, be slightly lower than they were in 2012 and that in the year 2014, the cost of homes will experience a moderate increase
Amid panic that the real estate market in the Greater Vancouver area is taking a detrimental hit is the reality of the situation: Greater Vancouver housing prices have only dropped about 2 to 3 percent over the past year, according to data collected by the B.C. Real Estate Association.
Fewer Sales Mean Greater Opportunities for Buyers
This being said, even the small drop is creating major hesitation among well-informed prospective buyers looking to get the best deal possible given the climate. In fact, even Mr. Muir himself admits that “sales levels in 2012 were quite low from a historical perspective.” The Real Estate Board of Greater Vancouver announced that Greater Vancouver had 1,351 property sales in January of this year, compared to 1,577 in the same month last year.
A February 10, 2013 report by Canadian Mortgage Trends is quick to admit that Real estate mortgage forecasts are largely based on speculation. Canadian Mortgage Trends reports what is perhaps the obvious -- that even with expert analysis, “no one knows how consumer psychology and external events will shape Canadian inflation and mortgage rates through year-end”.
Recovery and Higher Home Prices Predicted
It is this very uncertainty about the future of the housing market that is prompting fearful consumers to delay their plans to buy. But while the fear factor is most definitely real, so is the strong evidence that the Greater Vancouver area is heading toward a gradual recovery, according to the B.C. Real Estate Association.
Just as Wiarton Willie, Canada’s hedgehog forecaster, has predicted an early spring this year, Mr. Muir expects a swift housing market recovery in Greater Vancouver. Mr. Muir predicts that “once consumers in this spring’s market realize that prices have not dropped substantially, they will likely get into the market and get on with their lives.”
Get ready to trek forward, Bambi.