Market Update January: Buyer Opportunities in 2023

Hi everyone, I’m James Garbutt. And I’m Denny Dumas. And this is the Garbutt Dumas Real Estate Podcast.

Denny: Every few years or so Monica, we talk about this. And I feel like the next few months are going to be one of these situations that there’s a ton of opportunity. And in the fall, we talked about it a little bit, but it seems like we’re nearing the end of this, this very uncertain period in Greater Vancouver real estate with the rate hikes. Really tough to predict when that’s going to stop but it feels like we’re approaching the end. I don’t know if that means one more rate hike. I don’t know if that means five more rate hikes. But it feels like the worst is behind us and it seems like buyer sentiment is kind of feeling that way too.

Monica: Yeah, we saw a lot of that even during like the pandemic, just before the market really took off. There’s a lot of people sitting on the sidelines because of fear. That’s usually why people sit on the sidelines when it comes to real estate and then as soon as the fear lifted, interest rates started to drop. It was just a buying frenzy. And I think that quality always repeats itself in Vancouver. So it’s kind of like the floodgates open and everybody has been waiting but there are still people that have to buy homes. So eventually, like the gate’s going to open and it’s going to start.

Denny: We talked about this in our team meetings often every Tuesday morning and it’s: people are still moving. People move for lifestyle. It’s not all investment in Greater Vancouver. It is people that live and work here and have families here and upsize here and continue to move up the real estate ladder as they build wealth. And that’s what a lot of it is. That’s what a lot of our businesses.That’s what a lot of the market is. Yes, media headlines say it’s all you know foreign investors that are buying everything in Greater Vancouver. It’s just not the reality. The reality is the majority of our market is people that live here. Have families. Need to move from that two bedroom condo to that townhouse to that house to whatever it may be, but that’s the majority of our market. And it seems as though those people, even still, are just re adjusting their budgets to take into consideration higher interest rates and higher monthly payments and are still looking to move.

Monica: I think once buyer expectations have made the shift, we’re going to see a lot more activity. I think that a lot of buyers are going to look back on November 2022 to March or April of 2023 and think “Darn, I probably should have bought a place.” The interest is high right now the interest rates are high but they’re not going to stay high forever. So if you jump in now, you get a really good deal on a place that probably would have been $100 or $200,000 or more a year ago, you’re gonna lock it in at that price and then eventually the interest is going to start to go down and you’re gonna look like a genius. Simple.

Denny: We see the periods every few years and 2019 was a really, really good example where it seemed like overnight but it was a little bit slower than that. Market values went down 15-20% and Greater Vancouver was just a slow year. 2020 with the beginning of 2020 was very, very active and then Coronavirus hits and overnight we see single family homes dropped 20% in some areas. I remember doing a podcast that like April maybe, just as lockdowns started happening. Real estate was still kind of moving. It was just super, super slow activity. There wasn’t many new listings. There wasn’t a lot of people looking for homes at that time. And I remember doing a podcast saying this could be one of the greatest times in our entire life to buy a home because literally overnight 20% down and fast forward six months to the end of 2020. We saw that come back and far exceed what home prices were going into the pandemic. 

And this could be another one of those opportunities. This is different in that monthly costs are quite a bit higher than they were two-three years ago. And obviously consumers, people you know moving in for lifestyles that are upsizing their homes because they had another kid or we you know whatever that may be. They need to be cautious of potentially monthly costs going up a few more times in the next year. But in terms of market appreciation in the future, I think this is a super good opportunity to be, to be open minded about moving.

Monica: Right like I don’t want to paint a picture like “Oh yeah, now’s the best time to buy” because there are some hurdles. The hurdles definitely are unpredictable interest rates. And that puts a lot of pressure on your monthly costs. So you do have to be able to afford it and have the threshold to afford more as it comes. And it’s not just interest rates that rise of course inflation everything is so expensive. I think like, a dozen eggs is like $10 right now or something crazy. So yeah, there’s a lot of expenses right now. Strata, monthly fees are going up because everything is getting more expensive. So there’s a lot to consider before buying. But when you’re just looking at the sale price, price tag, there’s a lot of opportunity. And if you can afford to take on some of that pressure now looks like a really great time to buy.

And I always think like, different you know, throughout I guess my adulthood, there was you know, the 2008 recession market crash and everything you know. Of course Coronavirus, and and all of those, the things that came with it that have fluctuated, and there’s always people that win when the market is crap, someone always wins. So I kind of have to think whenever things get really bad like “What can I do to win right now?” somebody always comes out way ahead. I want to be the one that comes out ahead this time. And you just have to look to the real estate market to see, prices are low. Kind of looks like a win.

Denny: It’s going to be a weird next few months because and like I said, this specific time frame feels different than it did in 2020. It feels different than it did in 2019. Because of the unpredictability of where interest rates are going. What is the prime now? 6.25% Is that gonna go to 7.25%? Is that gonna go to 8%? I have no clue. Unfortunately, I don’t work for the Bank of Canada. I’d like to and if a job is available, I’d like to put my name forward an application in. I do have a resume that I can update.

Monica: Just as a back up plan.

Denny:  You can hire me as a consultant. Monica and I would like to do like, one hour monthly meetings with you guys. I feel like we could provide a lot of value.

Monica: I’d volunteer for that job. Volunteer. 

Denny: We wouldn’t even need any pay. Just give us a cup of coffee, we’ll be totally fine. We don’t work for the Bank of Canada. So it’s really difficult to predict these things we get asked all the time, like when is it going to stop? And our answer is like “I don’t know. We can just do the best we can with, with the situation that we’re in.” But it feels like we’re nearing. I know I’ve said that before. But it feels like it is this time. Who knows what the, what 2023 is going to do in terms of interest rates. But the reality is, is home prices are lower than they were a year ago, a year ago. And that’s not going to continue forever. 

I think Greater Vancouver is a weirdly resilient market. And there are a ton of people that are sitting on the sidelines right now waiting for some optimism. Some, some headline, some notice from the Bank of Canada saying okay, we’ve kind of reached the goal that we wanted to get to in terms of curbing inflation. We’re going to step aside or plateau rates for the next few months and just kind of see how it goes. I think as soon as that announcement happens, regardless of whether it’s the January announcement or six months from now, that is going to be like floodgates opening in Greater Vancouver. There are a ton of people sitting on this sideline right now that want to move that are just hesitant to get into a new mortgage, whether it’s a variable or fixed at a higher rate than it was two years ago.

Monica: And it’s not just buyers that are hesitant. I mean, sellers are hesitant, there’s not really a lot of great listings out there right now. Most of the listings that I see in the areas that we work are like lower quality listings. A lot of times they’re overpriced and I’m not just talking overpriced because of the price adjustments. I’m just talking delusional in general, just like really high prices. They’re just trying to see if they can sell. 

Yeah, sellers are really hesitant too and I think that that’s created more of a pause in the market. When you add in the fact that buyers are hesitant is the supply is this not great. And people with those premium products like really great houses, really great condos in a great neighborhood. They hold on to them when the markets slow. They don’t sell low. They wait and try to sell high. People are really educated when it comes to making money on their real estate investment. A lot of people like to make money in Vancouver when they sell their properties. It’s not like other places in the country where you just hope to break even when it comes time to sell. So because of the sellers, the seller hesitation I think that that’s adding a little bit more pause to the market. As soon as sellers start seeing some exciting sale prices, we’re gonna see them come off the fence.

Denny: It’s a good point. The inventory has been fairly low for the last 12 months regardless, for a lot of product types but the good inventory has been hilariously low. Good meaning like the good house on the good street with the curb appeal that has the updates. A lot of, a lot of sellers and a lot of our conversations with sellers with those like really great quality family homes in good neighborhoods. A lot of our conversations with them are, let’s reconvene in 12 months. Let’s do you know, you’ve lost $250,000 worth of equity in the last 12 months. Do you have to sell? Do you have to downsize? No. Okay, let’s talk again in 12 months and see where market values are at then. 

So I think a lot of those people are just sitting on the sidelines yesterday, I’m talking about low inventory, had a listing appointment in New West and currently there’s 35 homes for sale in New West. 35. Usually in a busy spring market that number is 120-130-140. We’re currently at 35. There’s nothing. And a lot of those homes are like busy streets or basically land value because you know they’re 1930s-40s homes that have had no maintenance done to them. And they’ve been sitting for a long time. It’s not like every week, like in a busy year like 2021, where you’re seeing three or four fantastic family homes on great streets come up for sale. And a lot of the upsizers are buyers that are, that are considering a move but hesitant because of rates, they’re being really picky and those good homes aren’t available

Monica: No. That’s true. I noticed I was doing a CMA in Port Moody and in a certain area of Port Moody like the Heritage Mountain area, like Heritage Mountain / Mountain Meadows the whole area at Large. There was four houses. Four. On the market. So I mean yeah, these houses are all close to 2 million so it’s not like the fly off the shelf, detached house especially when the market slow but if there’s four. That’s not much.

Denny: In a busier, like 2021, would that be probably like five or six a week that list, right? 

Monica: Right.

Denny: So I mean, that is pretty good example right there. Those two examples of just, a good quality homes, a lot of sellers are just sitting on the sidelines and so are buyers and buyers are being picky.

Monica: Yeah, I had a conversation with a seller yesterday that, you know, we’ve been on the market, we listed just before Christmas, just because their family situation, like we discussed, before people have to move because of family stuff. They have a child on the way so they would kind of want to get ready to upsize. But they, they’re not being really sharp with their price because they have no motivation, because there’s nothing on the market that they want to buy. They don’t have their eyes on anything, so they don’t want to mark down their place and sell it and wait six months for the home. Right? So it’s it gives way to a lot of opportunity because there are some good products out there that are just sitting.

Denny: Coming back to our original diagnosis of what’s going to happen in the next few months. We are educating buyers on looking for opportunity right now. But we’re also telling them that the good homes aren’t available. So how do you balance that as someone who is currently considering an upside? Do you take advantage of the next three months? At the recession of potentially not waiting for that perfect family home? Or do you wait for the perfect family home even if that takes you into May, June, July, August?

Monica: I caution anyone looking for the perfect home, because that kind of really gets in the way. Looking for the perfect home can really screw you up when it comes to…

Denny: That is such a Realtor answer right there! The perfect home doesn’t exist. Remember we talked to, remember we had a podcast about like, rating a home out of 10. If it’s less than seven, ignore it – seven doesn’t exist. If it’s an eight go after it because 10 doesn’t exist.

Monica: No and the other thing is like, that perfect home, when it pops up, you really think you’re the only one that’s going to want it like LOL. There’s gonna be all the other people that have been waiting around trying to find the perfect home they’re all gonna go off to the same one. It happens every time. We saw multiple offers on several homes in December. Several. They were just really really good ones that were priced, you know around market value. We’ve already seen it in January homes go into multiple offers or get offers within the first day or two on market because they’re desirable homes in a desirable neighborhood and they’re move in ready.

So I don’t think if you’re looking to win, I don’t think the perfect home is the goal. When I say like, buyer opportunity, where can you really make a win. I just think something that has future potential for equity that you can score on now for quite a bit less than what it’s worth I would say. I don’t think a win would be realistic when it comes to finding a perfect home. Because there aren’t many of those. I just don’t think that’s a real thing.

Denny: I like it. 2023, let’s go!