As we begin 2019, the question we are most asked is, of course, “what is going to happen in real estate this year?”
That is a good question and my answer often is that if I had a crystal ball, I sure would not be working in real estate. That being said, there are indicators that give us some insight into what might be ahead as we move forward through the new year. In looking at the indicators and reflecting back on the 2018 sales data, we are able to gain a better picture of what is in store for 2019.
Throughout 2018, several factors contributed to a cooling of the real estate market and those factors remain as we move into 2019. The new stress test to qualify for a mortgage combined with higher interest rates, a slowing of the stock market which is perhaps testing consumer confidence, global trade facing uncertainty, and continued government policy changes to try to solve the affordable housing question all came together to impact the local real estate market in the past year. On top of this, there was a jump of more than 50% in home values that had been purchase over 3 years ago and a 88% to 106% increase in values on homes purchased over a 5 year timeframe – all increases that are economically unsustainable.
While the first half of 2018 continued to follow much the same trends as 2017 with prices moving higher and inventory remaining low, the second half of the year was a much different picture. All the stresses I mentioned above came into play and resulted in an average 36% decline in the number of sales in Squamish as well as a drop in overall sales prices.
Breaking down the numbers a little more we can see that the sale of single family homes dropped by 34% over the course of 2018 and that the Home Price Index reports a 4.6% price decline over the one year period between January 2018 and January 2019. Meanwhile, if you listed your home in 2017, you had a 61% chance of selling it and in 2018 this dropped to 44%. As a result, the average ‘time on market’ numbers are lengthening as properties sit on the market longer.
Townhomes experienced the biggest slowdown in 2018 with a 44% difference in the number of unit sales as compared to 2017 and a 8.3% decrease in sale price over the last 3 months of 2018 according to the Home Price Index.
In 2018, there were 26% fewer apartment sales while this area of the market simultaneously witnessed a 21% increase in inventory levels. The Home Price Index currently shows a 14% decrease in median sale price as compared to the first few months of 2018.
Click here to view the 5-year trends in unit sales and median sales prices.
What to expect moving forward
With these market adjustments, it is likely that some buyers who were unable or unwilling to jump into a heated market place are still out there. This means that, while the sales may not be what they were in 2015 through 2017, there are people who still want to purchase. Sellers will need to be prepared to have their properties sit on the market longer and they will need to be price sensitive. Going forward, people will continue to make life changes which often involve a real estate transaction.
Information deemed to be accurate, all information taken from the MLS Database, January 2019