FVREB Exclusive: No market correction on horizon; prices and sales to stabilize in 2022

By Bryan Yu, Central 1 Chief Economist

As Fraser Valley REALTORS® are aware, your region, along with Metro Vancouver as a whole, has experienced robust demand for housing for much of the past year.

The drivers have been well established. A combination of sharp mortgage rate declines and a pandemic shift in household needs propelled demand to record highs. Specifically, homeowners flocked to spaces with more square footage and green space as homes were converted overnight into a fuzzy mix of workspaces and living quarters, which emerged as a permanent, long-term shift in how we work.  

Fraser Valley: A ‘sweet spot’ during the pandemic

This shift benefitted all markets but most noticeably Fraser Valley’s, amplifying patterns already in place prior to the pandemic. Relative affordability and availability of ground-oriented homes have funneled more households into your region as commuting hurdles have been lowered by remote work.

Indeed, the numbers are striking.

At its peak this February, FVREB reached a seasonally-adjusted 2,818 units per month and more than doubled February 2020’s pre-pandemic level. The pace has since eased as the broader market has embarked on a more normalized trend with less restrictive health measures and some satiation of future demand.

That said, through the first eight months of this year, sales were 84 per cent higher than same period in 2020, which exceeded the 79 per cent gain in the neighbouring Real Estate Board of Greater Vancouver and the provincial increase of 68 per cent. While early pandemic weakness contributed to this gain, the performance in sales was still stronger than the same period in 2019.

Despite some deviations among local markets, with Mission lagging growth in other Fraser Valley communities due to lack of supply, robust trends have been near universal in the region led specifically by White Rock, Surrey, and Delta.

Stellar price growth

The upward shock in demand and dearth in supply propelled the MLS® Home Price Index Benchmark price up by 17 per cent over the past year in the broader Lower Mainland region but, gains in the FVREB rose nearly 25 per cent to a record $1.07 million, underscored by a 28 per cent increase in Abbotsford, 25 per cent in Langley, 36 per cent in Mission, and Surrey at 25 per cent.  The average residential price in the board area rose $165,000 in just one year. In fact, many home sellers received a windfall in one year that exceeded their annual wage earnings

By and large, we expect sizzling market conditions in the Fraser Valley to cool and continue to normalize in 2022, with price growth slowing sharply. With the pandemic hitting 18 months, the rush of buyers looking for additional space has largely been satiated while affordability gains from low rates have for the most part, been offset by higher prices.

Demand to stay constant in the Fraser Valley 

At the same time, the outlook remains steady for home sales and prices. While pandemic drivers such as working remotely fulltime for most people retreats, it will not fully revert. Many employees will continue to engage in a hybrid remote work environment and be willing to live further from work and choose the Fraser Valley.

Mortgage rates are anticipated to rise modestly over the next two years but remain low and supportive of demand. We also expect persistence of strong population growth. Fraser Valley municipalities have outpaced gains in other Lower Mainland-Southwest markets owing to relative affordability, which is particularly important for young families. This flow will continue as more millennials march toward family formation and search for the lifestyle the region has to offer. A spike in post-pandemic immigration will only amplify this.

Finally, over the next couple of years at least, firm demand will continue to face a relatively undersupplied market, particularly for detached homes, which will become an increasingly scarce commodity, even in the Fraser Valley. We see this as keeping prices elevated, while shifting the market increasingly towards townhomes and apartments, which is already being developed in multitudes in the Fraser Valley.

Bryan Yu joined Central 1 in 2010 and was appointed Chief Economist in January 2021 and is recognized as an expert economic forecaster in BC. Prior to Central 1, Bryan was an economist at BCREA and Housing Canada (formerly CMHC). Bryan receives detailed FVREB MLS® statistics monthly from the FVREB and extends his appreciation to all members for the depth and accuracy of the data.