Real Estate: “Buyers” versus “Sellers” Market predictions
“Sellers will commonly say, ‘I’m going to wait until the spring, when the market is better.’ And I warn them that it could be worse. And buyers are saying ‘It looks like things are bad, I’m going to hold off until the market drops another 10 or 20%.”
“While the national housing market appears to be retreating in an orderly way, the data show pockets of sharper slowdown, particularly in the western Canadian cities of Vancouver and Victoria, which once led the hot housing market.
“Personally I don’t see any revitalization of the market in the near future,” said Victoria real estate agent Tony Joe, noting that investors have left the market.
Residential sales fell 8.3% in September from a year earlier in Victoria and were down 32.5% in Vancouver, according to the local real estate boards. Prices were down 2.6% in Victoria and 1.4% in Vancouver on the year, according to the Teranet report.
The price declines are far smaller than the plunge that hit U.S. homeowners during the crash. Still, buyers are hesitant, wondering if they should wait until next year to purchase.
“Sellers will commonly say, ‘I’m going to wait until the spring, when the market is better.’ And I warn them that it could be worse,” said Joe. “And of course buyers are saying ’It looks like things are bad, I’m going to hold off until the market drops another 10 or 20%.”’
Joe, a 21-year industry veteran, does not foresee such a drastic decline, simply because Canadian lenders have been prudent and interest rates are not going up soon. Sellers will pull houses off the market rather than accept a price drop.”
– from ‘Canada braces as housing slowdown takes hold’, National Post, 5 Nov 2012
I remember talking to a builder…who equated Banking with “Umbrellas” . He stated that when the sun is shining aka healthy economy…the bank will always hand out umbrellas (ie lend money)……..but when it rains ,ie economic slowdown..and you ACTUALLY NEED AN UMBRELLA…the supply dries up.
In any market..the BUYER determines the price…not the Seller. In a HOT market….this still applies…what some people don’t realize is the Buyer feels pressure from other buyers…so he will meet or exceed the Seller’s asking price…but again its the buyer that sets the price. Simple “Supply versus Demand”. So while the Seller is often lulled into thinking they have control, but are in fact simply not realizing its based on the last greater fool “buyer”. In a HOT market, there will always be that literal “last buyer” who paid the peak price. Its like the laws of physics…a limited amount of energy that ultimately runs out. Then all of a sudden the dynamic shifts to static.
Then the static shifts to a new dynamic, but the buyer still sets the price..the only difference is the price does not increase, it has peaked, now the pendulum swings a different way… the psyche of the buyer does a major 180 degree turn.They no longer fear competition ……and thus bid HIGHER, in the hopes that their purchase will find a greater fool after them. Realizing there is little if any competition…they now sense THEY could be the greater fool.
The only way to avoid being a “greater fool” is to now sit on the sidelines.
See how the dynamic works ?
If I was a Seller at this time ?…this time of year is generally SLOW…most people are focussed on Christmas. However, many others will be of the same mindset, and ultimately the Spring Market will have a flood of listings. The main variable is how anxious are Sellers to sell. What could happen is that enough frustrated sellers sell and that sets a new benchmark…again the chasing the market down.
“Joe”as noted above….seems to give a conflicting message. The Banks and Gov’t have left intervention far too long, they really have no control over the long term damage that will occur by this delay.
Or….Just image if you had say $1 Million cash to buy a home. Would you be buying now ? You would probably think that for every month you waited, more deals and better deals will be forthcoming..ie the market has dropped 30% since Spring….that’s $ 300, 000 you still have saved opposed to the $1 Million house you may have been tempted to buy in April.
No one can predict the bottom ie when or at what average price point. There are far more variables to consider than the collapse we saw in the early 1980’s.