For many members, the pandemic market of 2020/2021 is possibly the most intense, prolonged sellers’ market that they’ve ever experienced. A majority will recall the last market frenzy of 2016 and still others, the incredible run-up to 2005, but a numbered few have experienced every market peak and downturn in the Fraser Valley since 1977.
One of those REALTORS® is Jim McCaughan. A name very familiar with hundreds of Fraser Valley members.
The now, part-time Managing Broker with Century 21 Creekside in Chilliwack, is one of Fraser Valley’s and BC’s most respected authorities in real estate.
The former, long-time FVREB member, Past President and John Armeneau Professional of the Year recipient, Past President of BCREA, real estate educator and trainer, Jim is currently serving as the Chair of the Real Estate Foundation of BC while continuing to guide Realtors through their daily real estate transactions.
This is part one of a two-part conversation with Jim to get his insight on what makes this pandemic market unique and how Realtors can manage client expectations as the market changes.
Q: Jim, in 44 years, you’ve experienced six market peaks, each one higher than the previous – how does 2021 compare?
I would characterize this as a classic over-heated sellers’ market. It’s very similar to 2016, but what sets it apart are the staggering amounts over-asking. I was hearing on a regular basis, offers in the range of $250,000 over-asking, which is crazy. Absolutely nuts.
If you talk to others who worked in sales way back when, no one contemplated offers of that magnitude. Prices on listings would gradually escalate. You’d sell a property for $90 grand, the next guy would ask $100 grand, the next one after that $110. There was always bargaining in good faith where you always added a little bit on to have room to come down and make the buyer feel good. That didn’t happen in this market.
Q: We’re hearing from members and seeing in some of the numbers that the market has started to change, we’re off the peak. What are you and your Realtors seeing?
100%. We’re seeing far fewer multiple offers and those that are getting them are significantly less. But as with all real estate, it comes down to property type and location. Moderately priced single-family homes, which up to recently here in Chilliwack used to be in the $500’s and are now in the $700’s, with three bedrooms, double car garage, on a stand-alone lot, are still seeing a lot of activity, possibly even multiple offers, but not 10 or 20.
“If you’ve got an ugly ducking, not all that attractive or clean, in a semi-attractive location, you’re going to have to wait 30 to 40 days to get an offer.”
And if you’ve got a really ugly duckling in a really poor area, it may even expire. This is the new reality.
Q: Is there a possibility that buyers will all stop? Will they step away to the sidelines to await a price correction?
I think the market will plateau. People will no longer pay peak prices when they don’t have to.
“There’s an old adage, whatever makes them bite, makes them all bite. And whatever makes them stop makes them all stop.”
If one seller got lucky and got $820 at the peak, and now there’s no buyers. The next owner will try $810, then $795, and the adjustment is underway.
I think part of the reason the market is calming and will continue to calm is because society is opening up again and people’s priorities are beginning to shift. I feel there’s going to be a lot more demand for activity and travel than we imagined.
Plus, we have tons of people in our region who own property just across the US border, and they haven’t been able to even check on their places for over a year. There is going to be a lot of pent-up demand for other activity, not just buying homes.
Q: Right now, as you mentioned, demand remains strong, but while the market is in the process of shifting, how can Realtors manage their sellers’ expectations?
Managing seller’s expectations in a changing market is very difficult. You have to say, ‘Mr. Smith, I know the neighbour around the corner just got $820, lucky him, but you’re not him. That was then and this is now. And I know it’s only three weeks later, but no one is lining up. We are only getting one or two inquiries per week and the feedback is that your home is okay but not outstanding compared to all the other similar ones for sale.’ So, if you want to sell, we need to adjust.
“Realtors need to educate their clients on the changes.”
Use updated CMAs, market statistics, graphs, information you’re hearing from colleagues, everything you’ve got in your arsenal to show them what is happening and what it means to them. It’s also a good strategy to educate your sellers on any equity gains they have seen, even with a slight softening in the market. They may have hoped for $250 grand in gains, but $200 isn’t anything to sneeze at.
Q: But sellers are always going to want yesterday’s prices, are they not?
Of course, and buyers always want to pay as little as possible. It all comes down to motivation. People who are not really seriously motivated to sell and who are only selling for price gains they hoped to make, are going to be annoyed. They are going to have a hard time and may eventually take their home off the market if they don’t need to sell.
People sell for many reasons. They got a raise at work and can upgrade to a bigger or better home. They had a ninth baby. They got transferred to Calgary or they’re having a new home built and it’s finally done. However, there are three unfortunate reasons that can force people to sell. They may not want to, but they need to: money problems, matrimonial problems, and health problems. Those three are immune to the market. They happen whether the market is good, bad, or indifferent.
There will be people that don’t have to sell, and they’ll step aside. But there will always be people who want to live close to that new grandchild, or want to accept that job in Montreal, or unfortunately have to give their ex the house, and they will look to their Realtor to help them.
“They’ll say, I have to sell, what do I have to do? Our job is to guide, advise, and protect them as best we can in whatever market we’re in.”
Jim McCaughan has worked in Fraser Valley real estate since 1977 and has guided both clients and Realtors through six major market cycles. Next week, look for part two of our conversation with him, when we ask him how he thinks this pandemic sellers’ market will end, with a bang or a whimper?
Source: FVREB Communications