Friday, August 17, 2012

How deep will the 'softening' of the market be? Deep enough that the Industry has begun shifting from 'training' the buyers to 'educating' the sellers.

Last Wednesday we introduced you to Shaun Kimmins, the latest realtor who has taken to telling you about the way the market is truly suffering as opposed to the standard industry spin.

Kimmins went a step further, venting his frustration at the misleading statistics being put out by the REBGV and how a much rosier picture is painted for his downtown condo market that is in complete contrast with reality.

Kimmins message to his customers right now?
"Sales volume is down considerably. Sharpen your prices if you want to sell."
Now that's a message many of his clients probably don't want to hear from him. Kimmins, no doubt, must spend considerable time and effort justifying that message.

And it's doubtful he's alone.

Perhaps that's why BC Magazine was moved last week to come out with an article headlined: Realty Check: B.C. Realtors Not to Blame For Softening Market.
Despite rumours to the contrary, real estate agents are just the messengers when it comes to Vancouver’s volatile home prices.

Agents do not drive the price of the real estate market.... There is no collusion or price fixing. There is no “propping up” of price points. The reality is Realtors will help sellers decide a price threshold for a property, but the seller approves it. In many cases, the seller will dictate the price.

When a home doesn't sell, the seller, if actually motivated, will drop the price to the point where the market finds it attractive. Seller's thoughts on prices vary greatly from the buyer's perspective. The cumulative mass of buyers and sellers create the market. Agents don't set the market — the consumer does. An increase in product (listings) with few buyers creates a buyer's market.

When sellers don’t lower their price to meet the market’s perception of value, those houses sit unsold and are joined by other listings, creating a build up that result in softening prices as those sellers all lower their prices to meet the market’s expectations. 

Now we have the question of the day: How deep will the market soften?

Hmmm... sounds to me like realtors are taking a lot of flack from prospective property sellers and the 'education' of sellers has begun.

Is a shift in the R/E propaganda machine underway?

For years now, media stories have been 'training' buyers that they have to get on the property ladder, they have to find ways to scrimp and save, have to take on that excessive debt or "be priced out forever."

Is this the first sign of a teutonic shift in tactics?

Has the offensive begun in an effort to now 'educate' sellers to be receptive to realtor suggestions to lower expectations and asking prices?

It seems they have. Note how BC Business answer's their rhetorical question about how deep will the market soften:
Apparently, pretty deep.

David Madani, economist with Capital Economics, has forecasted a 25-per-cent price drop in the next two years. Chinese investment dollars are gone. U.S. agents are seeing record numbers of Chinese buyers who are enjoying the rock-bottom prices of new construction in Miami, Los Angeles and New York. We still have consistent immigration to B.C., low inflation and high employment to celebrate, but the lack of interest rate increase and the new borrowing thresholds for insured mortgages will not jumpstart price increases (or sales) anytime soon.

The softening of the market is a harbinger of what is to come.

This isn’t the fault of organized real estate.
Thus the lesson ends for today: Don't blame the real estate agent for a market where properties don't move... lower your asking price.


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  1. A Teutonic shift, eh? I can see the new tactics already - "lower zee price or ze Panzers will roll through ze haus!" - a tectonic shift, perhaps?

  2. The RE industry in general is very responsible for driving prices higher. They notice the trends and thus get their clients to list at ever higher prices when demand warrants it. They also obfuscate data to hide the truth of what's happening (like now) to fool buyers and sellers that the picture is better than it is. They are a cartel and as such wield tremendous power over the RE economy.