Will this market last?
Will this market last?
I get asked that question a lot….I mean A LOT.
I wish I had a crystal ball, but I must admit that even after 41 years in this profession, I have not seen this scenario. I have seen drastic up and down markets, low interest rate and high interest rate markets, markets triggered by catastrophes, poor global financially manipulated markets like the Dot com era as well as many other things that can cause market swings, but never this.
So, what is different about this market scenario? Well first off, I have never experienced a full blown pandemic to the extent of this one with the guidelines and government intervention and mandated closures, limiting of businesses and their activities, travel, who you can see and more importantly who you can’t see. I looked after my grandmother for a little over 20 years and I loved the opportunities to go over to her house and have lunch, chat, work in the yard and in the later years to visit her at her retirement home to just sit and talk and get a great hug coming and going. I will be forever grateful for those times and that she didn’t have to experience the lockdowns and lack of personal touch like hugs and a kiss. My mother in law who I love dearly and resides in a retirement home, I have not been able to personally visit or hug since March of 2020, which in a few weeks will mark one full year. I do get to talk to her on Facetime but that is just not the same although better than nothing. I know she does not fully understand why my wife is the only one, once a week that can visit her but not the rest of us or her other 6 other children. Sure, she knows it is because of something that is happening out here but soon after she is told it seems to fade away till the next time she asks about it. Whoops guess I got off track.
So back to the question at hand. Will this market last? Truthfully, I don’t really know and if I did I would have a the gift of being able to see into the future and if I had that I would probably buy lottery tickets which I think is a waste of hard earned money.
So, what is the difference with this market and world event that makes this scenario harder to gauge? Well first off, most of us haven’t experienced it before and secondly, the world is a much different place than it was during the last real pandemic. There have been approx. 17 pandemics with the first recorded in 430 BC and the last one before this was SARS in 2003 but that looks like a cake walk compared to what we have with Covid19. In the last year we have all experienced the good and bad, tried to bend with the flow and be responsible citizens doing what is asked of us while trusting it will all work its way out.
So, what are the things that we didn’t expect. Well how about the fact that one year later we are still dealing with the ramifications of what continues to happen around the globe!!! Interest rates have gone to an all time low which has hopefully given some relief from less hours worked and stress of bills still to be paid. Some businesses have been impacted to a saddening degree and some have had a huge surge in their business and bottom line through very impressive entrepreneurial efforts. To many have died and many are not taking it seriously enough to stop the spread of Covid.
For me, one thing that I didn’t expect was the exodus of homebuyers from major urban centres which is one of the more interesting curveballs thrown at the Canadian real estate space by COVID-19. The sudden creation of what many feel will be a lasting remote work paradigm forced the country’s homeowners to question the logic of paying big city prices for their properties if proximity to a job downtown is no longer part of their dream home checklist. If you can live anywhere and still be able to clock-in for work, why not sell at today’s inflated prices and pay cash for what’s almost certainly going to be a larger property in a quieter, less congested community ?
Some of the ripple effects of the urban exodus will not be felt for years, but some are washing over small Canadian communities as you read this.
Impact on first-time buyers
Without question, the cohort most impacted by the urban exodus has been prospective buyers in formerly affordable smaller markets.
This is hardly a new trend. Sellers in pricey urban markets like Greater Vancouver and Toronto have been cashing-out and purchasing larger properties in nearby cities like Nanaimo, Surrey, and Abbotsford (in British Columbia); and Hamilton, Oshawa, and Guelph (in Ontario) for years. The result has been an influx of demand in cities even further afield – sleepier Ontario communities like Milton, Orangeville, and Peterborough; or virtually any city on Vancouver Island.
The result in all these smaller communities has been a drastic increase in housing prices, eliminating the affordability factor, and edging out budget constrained buyers in the wake of buyers cashing out in larger markets like Vancouver.
Where will it end? I guess we will see, but with one example of a house selling recently in Departure Bay Nanaimo for $155,000 over the list price, the best guess I have is that this cannot last. That I can say I am sure of. It is the simple compounding effect that shows how impossible it is to have this continue long term. If you sell and have to rebuy, then it may be somewhat of a wash and if you want to sell with no intentions of rebuying, then this could be an opportunity to cash in while you still can.
If you want to know what your property is worth while this market is still red hot, just contact me and I can let you know what your homes value is and what your options are. No pressure, just an honest evaluation from 41 years of experience.
Hope you all enjoy the snow and stay safe.
Brian McCullough, RE/MAX of Nanaimo
#1-5140 Metral Drive
Nanaimo, BC V9T 2K8
Office: (250) -751 – 1223