I just attended the company’s 2016 Sales Kickoff meeting and heard the yearly economic presentation by Bryan Yu from Central 1 Credit Union.
I’ve attached the pdf for your convenience in the link above, but I’ll summarize the main points from his presentation and from his talk below:
– China economy still weak and slowly recovering (~6% growth)
– Euro economy around 1% growth
– US labour market at 5% unemployment (down from close to 10% in 2011)
– Oil prices low due to too much supply
– Cost to produce NEW Oil for Canada, around $70/barrel
– Canada’s interest rate – no anticipated increase in forecast until at least mid 2017
– BC economy much better than other provinces
– BC labour market incredibly strong
– Increasing # of housing starts in the past few years, but demand is STILL more than supply, developers frantically developing to quench high demand
– Based on economic fundamentals, no bubble in sight
– Year over Year MLS HPI Benchmark Price going up 13 – 28%
– Vancouver Vacancy Rates for Condos at ~0.9%
– Real Estate works in cycles, so there will be Housing Correction in the market eventually, but it’ll likely have to be a recession and will likely be in the 10 – 15% range (Historic: 20% drop during 9/11, 11% drop during 2008 financial crisis)
– Millennials still want what their baby boomer parents had, ie live in a house
– City’s plans are to increase densification and detached housing stock decreasing rapidly, increase multifamily zoning
My personal takeaways:
– bidding wars are common now even amongst condos, and by the time a market correction happens, prices will have gone up so much that a market correction won’t help in terms of affordability,
Example: when houses are at $1M, having a 10 – 15% housing correction after houses go up to $2M doesn’t really help a majority of buyers
My recommendations for buyers:
Housing prices are increasing, faster rather than slower, unfortunately, it is much harder for buyers than it is for sellers.
I know you don’t like bidding wars, but it’s better to join the bidding war for a $500K condo and pay $550K than to have no bidding wars, but pay $700K for the same condo if you wait.
You may be thinking to wait because of the lack of inventory, and under normal market conditions, that’s the best thing to do. However, in this market as prices are increasing at rates of 1 – 2%/month, waiting (even a few months) could well cause you to be priced out of the market.
My recommendations for sellers:
It’s never been a better time to sell your house for top dollar. The question many people ask is, “if the market is so hot, then why isn’t everyone listing their home on the market?”. There is some differing opinions on this but one opinion is that there is hesitancy for sellers to list because once they sell, where would they go? Since there’s a lack of inventory, if they sell, they may not be able to buy what they are looking for.
Nevertheless, if you’ve wanted to downsize or sell that investment property for a good profit, it’s a good time.
In a normal market, sellers would sell first, then buy so they wouldn’t have to put a “subject to sale” clause on their offer. In this market, it’s better to buy first WITHOUT putting a subject to sale clause and then sell your home. Your home will have no problem selling in this market, but you may have problem buying in the midst of constant bidding wars even for a less than desirable condo in a less than desirable neighborhood.