As promised, here’s part two of our insightful conversation with former long-time member and FVREB Past President, Jim McCaughan, about the current pandemic sellers’ market and where it’s headed.
As we mentioned in our last issue, the current pandemic market is likely the most intense, prolonged seller’s market that most Fraser Valley members have ever experienced.
Many 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. The now, part-time Managing Broker with Century 21 Creekside in Chilliwack and Chair of the Real Estate Foundation of BC, is one of Fraser Valley’s and BC’s most respected authorities in real estate.
The second half of our conversation with Jim focused on how he thinks this seller’s market will end.
Q: You worked during the worst market correction in modern history in 1981, do you think that could happen now?
There are a few doomsayers that say that 1980/1981 could happen again; that buyers will just fold up their tents and say we’re not camping anymore. I don’t see that happening now.
The 1980 market was the worst one I have ever been in. New, three bedroom houses were selling in the Fraser Valley for $49,000 to $59,000 and within months went to $110,000, they doubled. It was lunacy.
This was not making offers over asking, this was people just increasing the price of each subsequent purchase one by one. And then the market corrected the following year and the prices rolled way back, in some cases 40 per cent.
We had to say Mr. Smith, ‘I know you’ve got money problems, health problems and matrimonial problems, but here’s the reality, you bought at the peak for $110. Your house today is worth $76. And you owe $95 thousand dollars. You can’t sell. You just can’t sell.’ A lot of those people just declared bankruptcy. It was awful.
We’re not going to have that now. We had a small, rare peak in early spring and now buyers are just going to systematically offer $5,000, $10,000 or $15,000 less and the market will adjust accordingly.
Q: Why don’t you think buyers will just step away and wait for a bigger price drop?
Because people are coming here in droves, and they want to buy a home. They have complete faith that real estate is an excellent long-term investment in Canada because it’s been proven to be. They believe that the market is stable and will continue.
Do you remember that little party we held in 1986? Expo. What did we tell the world then? This is the best place in the world, you need to come check it out.
We had another little party in 2010. Remember it? The Olympics. What did we tell the whole world then? Well, guess what? They listened.
They’re coming. Loads of people from all over the world. And it’s a good thing. We’ve got more available land than any other country in the world. We’ve got lots of room and lots of opportunities. Like our forefathers did, people are coming here for those opportunities. Newcomers are incredibly hard workers and great savers. Good on them! We need as many of those as we can get!
Q: Finally, the elephant in the room – the pandemic – one of the major causes of the market we’re in. We appear to be in the home stretch – will the market return to balance once our society returns to a new normal?
We are in a cyclical business. We always have been and always will be. I think the market will calm, but I don’t foresee a dramatic swing.
This whole interview could be written around three words: supply versus demand. And right now, the demand is far outstripping supply. It will find a new balance, a new level.
At then at some point there will be a reversal of the current market and it will go the other way. That would likely take a recession in the economy, which I don’t foresee. I think we’re on pretty solid ground. I see nothing on the horizon indicating economic crisis or chaos. I think there will be huge opportunities for people to get employment if they wish to have it, effective June 15th.
A buyer’s market starts when you have eight months or more of supply. Zero to five is a seller’s market and five to eight is balanced. We have 1.1 months of supply in Chilliwack right now. In all my years, I have never seen it this low. Ever.
After 2016, there was no price correction. None. Prices softened, but they didn’t crash.
I hope I don’t have to eat a plate of crow in six months. I hope the market doesn’t crash and prices go down 30 per cent. But in my opinion, it will stay solid. I will be shocked if I have to eat crow, but if I do, I will.
Jim McCaughan has worked in Fraser Valley real estate since 1977 and has guided both clients and Realtors through six major market cycles. The part-time Managing Broker with Century 21 Creekside in Chilliwack is also currently the Chair of the Real Estate Foundation of BC.
Source: FVREB Communications