"Sales volume is down considerably. Sharpen your prices if you want to sell."
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?
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.
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