I frequently hear concerns about the real estate market–What will it do in a couple of years if I invest in a home, or enroll in your program? The fact is: No one really knows. But some are scared off by headlines in local newspapers. Let’s get one thing straight: Newspapers run headlines to catch attention, not to express reality.
Sometimes the articles say the opposite of what the headlines say!
A recent article in The Province is a case in point. The headline suggested we should be expecting a 10% price drop in 2013. But when I read the article, that’s not what it said, at all. In fact, it said that a 2011 housing bubble had been created in Vancouver (which is very different from the Fraser Valley) because of the high-priced home sales to wealthy Chinese buyers in (get this) Richmond, West Vancouver and Vancouver’s west side, resulting in average Vancouver prices rising from $675,000 in 2010 to $780,000. The fall-off in this particular high-end market could bring average prices back “down” to $720,000 in 2013. Somehow, this was seen as a 10% drop. In reality, the average price will have increased 6.67% over 3 years ($720 /$675=1.067), if the price drop follows the “expert’s” prediction. The current price of $734,000 represents a gain of 8.74% over two years.
All this scare-mongering because of a dramatic fall-off of wealthy Chinese buying up high-end Vancouver properties. Who knows what the reality was for lower priced homes? It could be inferred that it is gradually rising.
So what’s happening in the Fraser Valley?
The reality is that we have not had a housing bubble and are largely still in the doldrums of the 2008 recession. Yet, our prices have gradually risen. At the end of 2011, the Fraser Valley Real Estate Board (which measures only a portion of the market, but is probably the best estimate of reality) reported a 4.5% gain. That’s the number we’ve been using for 2012.
Last month, at about the same time The Province article came out, the FVREB reported that the new mortgage rules implemented at the beginning of July of this year had had a significant negative effect on the housing market, with listings down to “historically low levels.” Yet, despite the dramatic downturn in total sales from July to September (26%), prices had still increased year-over-year through September. For single family, detached homes, the price increase was 3%. So, instead of a supposedly negative reflection on the real estate market (the headline was “Summer housing sales cool”), the article was really quite encouraging for real estate investors. A 3% increase isn’t bad!
What will happen to Fraser Valley prices over the next year or two? No one knows.
But, it is comforting to investors to know that, even when there is a serious bubble “correction” in Vancouver, and even when federal rules put a real damper on housing sales so that they reach “historic lows” in the Fraser Valley, the price still goes up 3% for single family homes.
And it is probably a caution to those who are waiting for better deals before they buy.