2014 Real Estate Outlook
Most Victoria real estate experts are predicting a similar year to what we just experienced in 2013, which ended with a 4% increase in sales, about a 10% drop in listing inventory, and about a 3% drop in overall average prices. The result was a pretty stable market which slightly favored buyers over sellers. Homes had to be priced correctly or they would not sell. Interest rates increased for part of the year, but dropped back down towards the end. The historic low rates of early 2013 disappeared, and there are no signs indicating that they will return anytime soon. If anything, we will probably see an increase in rates as the year progresses and into 2015 as global inflationary pressures begin to materialize.
Having said that, I have been in the real estate line of fire for 22 years now, and I have seen my share of ups and downs, and the overall market conditions at this time are very hard to predict. For instance, we are continually being told that the current global economies appear to be improving, the US housing market is rebounding, and the stock markets in North America are booming. However, this does not reflect the actual reality of the local real estate market in most cities across Canada, including Victoria. For instance, let’s look at Victoria’s numbers for 2013 again – Increased sales with decreases in prices and the number of homes for sale. In a normal supply demand scenario, decreasing inventory (Supply) combined with increasing sales (Demand) should result in an increase in prices. The reverse occurred in 2013. Also, the national economists and bankers seem to have mixed opinions on where the markets are going. You are hearing everything from a dangerous bubble could burst in the Canadian real estate market due to over inflated prices right down to the CMHC prediction that prices are going to increase in certain markets, including Victoria. It is hard to weed through all of the mass information and actually break through the layers to see a clear local picture.
A question that is asked often is “when will prices start to go up again?” This is a good question. A simple answer would be around the end of 2015, beginning of 2016. The basis for this is that real estate cycles usually last about 7-8 years, or 14-16 for a full down cycle and then an upswing. The last upswing which started in 2001 ended in the fall of 2008. The current downswing, apart from a brief rebound in 2009-2010 due to the government stimulus packages, in now in its 6th year. That would mean that the bottom should hit in early 2015 to the end of 2015 into early 2016, which means prices would then start rising at that time. We’ll see….
The main indicators (listing inventory, sales, and interest rates) are pointing to some improvements for 2014. The Victoria listing inventory is slowly dropping. Interest rates are still at near record lows. Prices appear to be stable, and sales are poised to continue to increase. These are all good signs for buyers and sellers of real estate. We might not have the peak prices we had a few years ago, but they will be back, and if you are selling and buying in this lower market, you will then benefit with increased equity when the overall market prices start to increase again. On the flip side, the window of opportunity is slowly closing as we approach the next upswing. Interest rates are scheduled to start increasing once the bond market starts rising due to the tapering off of US money injections into the US economy. This could result in higher long term mortgage rates over the next 12-24 months. Also, the bank of Canada will eventually have to start increasing the prime rate once inflation starts picking up. However, this again, is not predicted to happen until 2015, or early 2016. And once interest rates start increasing, the usual trigger is because inflation is rising, and this usually means that real estate prices will start to go up as well. Again, all of the forecasts appear to be pointing towards late 2015 to early 2016 for this to begin. Again, we’ll see….
Another facet of the market to watch is the number of foreclosures. This is an unfortunate part of the market and due to the global economic slowdown, and the drop in local prices, the number of foreclosed properties has been increasing each year. 2013 had the highest number of foreclosures that I have ever seen. 2014 appears on pace for even more. The savior for the foreclosed property is increases in house prices, and once this starts to happen, there will be a decrease in foreclosures. During the last upswing, foreclosures virtually disappeared, which is a good thing. Let’s hope this happens sooner than later in this downturn.
To conclude, the market should remain balanced and stable throughout 2014. I do not foresee a bubble burst or an increase in prices. I think interest rates will remain low for the balance of the year, and the good deals on real estate in Victoria will continue to be available for the coming year. The activity so far in 2014 has been up from the beginning of 2013. That is good news. Let’s hope it continues throughout the year, and that everyone will have a successful year in 2014!
In the meantime, here a few few links to various real estate sources that may be of interest to you:
– To stay informed on my listings and local real estate information, click on this link and hit “like”: VictoriaBCProperties
– Click for details of my Winter Newsletter: Newsletter
– For the latest historical statistics from the Victoria Real Estate Board, click here: VREBStatistics
– Search for listing at my Victoria BC Properties website: DaleSheppard.com
All the best to you and your families throughout this coming year!
Dale.
