I am always asked the question – where do I see the Victoria real estate market going in the next few months or the next few years. Based on my experience, there is no definitive answer to that question. I have been selling real estate since 1991, and I have been through the last slow period from 1994-2001 as well as the boom from 2001 to 2008. I can look at the past and present to get a general feel for where the market is going, but beyond that, there are too many forces at work in the economy, making it difficult to predict any future market outcome. I usually examine the historic real estate trends and assimilate them with today’s market, and include the worlds economic condition, other Canadian real estate markets and the local Victoria market, to come up with a ball park analysis to help buyers and sellers determine if the right time to make their move is now.
It appears that the current Victoria real estate market is in a stalemate. The number of listings remains at about 5000, while the number of sales per month averages about 500. This equates to about 1 in 10 homes selling on a monthly basis. This makes it very difficult for sellers who want to make a move now, especially when there is a slight downward pressure on prices, fewer buyers looking, and even fewer writing offers to purchase. This is likely a result of the recent tightening of lending rules by the Federal government, plus negative media posts and discussions amongst friends and family about prices continuing to go down. This, coupled with interest rates remaining at near record lows, leaves no reason for these buyers to jump in at the moment. Even if they do want to buy now, most need to sell their homes first, and once they list, they then become these same sellers, and are put in the same tough predicament of trying to sell their homes first. In other words, a real estate stalemate occurs.
On the bright side, my experience has shown that a seller can still make a move in this slow market, and not lose out on their future home equity gain, as long as they are repurchasing in this same market. These sellers must price their homes very sharply to obtain a sale, but the lower selling price will be recouped by the gains made on their purchase. In other words – sell low, buy low. Or, if you wait for the market to go up, you will then have to pay more for your new home, and the gain is usually negated.
There is also good news for buyers that buy now. The gains you might make by gambling on prices dropping further will most likely be offset by two significant scenarios: 1. Owning now means not paying rent to a landlord, and paying off your mortgage equates to building equity in your home now rather than down the road. 2. Your mortgage payments will likely be lower now than in the not too distant future, because the current interest rates are at near record lows, and most are predicting they will rise once the Canadian economy starts improving. And rates tend to go up faster than they come down!
Predicting the exact timing of the market turnaround is not something we can do, or we would all be rich. Usually it takes something significant to trigger a change in the market, like a large increase in interest rates, or a quick turn around on pricing, or global market booms, which usually sparks a buyer frenzy that eventually leads to a lack of housing inventory and to an eventual increase in prices. Most analysts are predicting that we are a ways off from this turning point, and that more of the same will likely continue for another couple of years. This stalemate will not last forever, but while it is here, all we can do is try to make the best of it.
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