Despite the tendency for the winter to be a relatively slow time for real estate, the true cause behind the low number of homes being sold is the booming demand for real estate, which the current supply isn’t able to meet at the moment. The springtime will likely be a hotbed for sales and purchases, with inventory continuing to be added to the market.
2022 Is Off to a Good Start With a Relatively Strong First Quarter
The first quarter of the year is always a somewhat sluggish time for real estate. Houses tend to be on the market longer and the inventory is usually not what it is in the spring or summer. That being said, the recent demand for houses, largely in part to some of the lowest loan rates in history, made for a rather brisk winter season.
The effects of the pandemic will be far-reaching, but one of the most immediate impacts was the drive for people to make use of the historically low interest rates. These rates mean that some first-time owners have a realistic opportunity to own homes, while investors and others who already are in the market are using their funds to make the best investments and deals possible, paying much less in the long run than they usually would.
What this looked like for the first quarter was that there was the typical slow-down associated with the end of the year, but that the numbers and pick-up of inventory and business indicate another boom year for real estate. Despite the fact that the Fed has raised interest rates slightly, they are still significantly lower than the 10-20% interest rates that were prevalent in the 1980s.
The Median Sold Price
The Vancouver market is showing no signs of cooling off. The median sold price in Q1 of 2022 was $545,000, which is up over $30,000 from the $514,649 of last quarter. Furthermore, if we look at the rates for Q1 of 2021 and compare it to 2022, the median sold price has shown growth of approximately 21%, and a noticeable 36% increase compared to this time in 2020. What this means for sellers is that they can still hit those desirable prices so long as the inventory remains consistently low.
The Total Number of Homes Sold
In 2022, the number of homes sold in Q1 was 1,644. This is a slight drop-off compared to the 1,734 homes that were sold in Q1 last year, at approximately 5 percent. This is a sign that the competition for homes has become fiercer, meaning that there is a shortage of supply compared to the demand for housing. It is important to remember that when making this comparison, only 5.7 million homes have been built in the entire U.S. from 2009 to 2019. That number is minuscule compared to the 20 million homes built each year from 1950 to 2009.
The Median Days On the Market
The median number of days on market for Q1 of 2022 was five days, indicating extremely fierce competition for homes. This means that within about a week of listing the house for sale, sellers will be free of their old home. The demand for houses in Vancouver is alive and well—and will likely only grow as we move farther into Q2, which is traditionally a hot time for both buying and selling homes.
The Current Mortgage Rates
The mortgage rates in Vancouver are approximately 5%, a rise from early rates of 3-4%. However, these mortgage rates are still historically low in comparison to previous years. What will likely happen is that some groups of investors will be driven away while others will make use of the continued low interest rates.
Some groups that will remain constant and consistent buyers in the market will be new homeowners, as well as large investment companies. Homeowners will likely rush to find a suitable home before rates rise too high to allow them to buy, while the investment groups will continue to use these low rates to maximize profits by paying less in interest over time for the same loans.
The Overall Future of the Market
Q2 will likely be another fantastic quarter for those in the real estate market. Even though inventory has struggled to keep up with demand compared to the previous years, there are still many who will try to make use of low interest rates to get a home now before it is too late. Another influence on the market is the recent uptick in foreclosures across the country. The initial COVID boom caused by the low mortgage rates and panic buying spurred people to attempt to secure their homes, only to find that they had no resources to actually pay off their mortgages. This was largely due to the pandemic recession, which left people economically strained, therefore putting them in a situation where they need to sell their houses.
In short, this means as a seller, you can still get a fantastic price for your home, and that the longer it sits in your hands, the more you can get for it. As a buyer, you will need to find a way to compete against other driven buyers like yourself. It is vital that buyers and sellers discuss the market conditions prior to moving forward with a move.
Buyers need to have a clear understanding of how to prepare and then what a winning offer looks like in this market. Sellers need to ask their agent about their options, especially if they need the funds from the sale of their current home. Contingencies are rarely accepted so you should know what the other options are for a seller who wants to buy. There are some bridge loan-type products as well as rent backs and other options. Again, call me to discuss the details of this market and how to make it work in your favor.