Vancouver house prices on a tear
Vancouver house buyers might feel like the real estate crash last winter never happened. Price-wise, the market has felt more like it did 18 months ago, with some houses being sold far above asking.
In the last three months, a heritage house at 274 E. 20th Ave. was listed for $959,000 and sold for $320,000 above asking, after eight days on the market. A heritage fixer-upper at 265 E. 24th was listed for $749,000 and sold for $1,033,000 within a mere 13 days. A month later, another house nearby at 214 E. 24th, was listed for $749,000 and sold for $950,000 within six days. A typical Vancouver Special at 4554 Walden St. was listed for $730,000 and sold eight days later for $958,000. All those houses were in the trendy Main Street area.
“It's very topical,” says realtor Rod MacKay. “Other places [in the country] are strong, but nobody's seen anything like this. What's really surprising is nobody anticipated the six-month dry spell being as slow as it was, and prices coming up as much. No one anticipated it bouncing back so far and so quickly.”
At the beginning of this spring's buying frenzy, buyers were offering $100,000 above asking in some cases. But by September and October, there were buyers – no doubt tired of being repeatedly out-bid – who are making offers so far above the asking price they couldn't lose. In the case of the house at 265 E. 24th, it went for $284,000 above asking.
“That takes a lot of stones to do that,” says the selling agent Darryl Sjerven. “There were 18 offers on that house. So you go in there, write an offer, and there are 17 other offers and you don't know what any of them are. They could all be just $10,000 over asking. To go and write $284,000 over takes a lot of guts.”
To describe the bidding mentality these last few months, Mr. Sjerven uses the analogy of a “hang loose” hand gesture – with the three middle fingers curled under and pinkie and thumb sticking out.
“Say you get five offers on a house, and suppose the house is listed at $750,000. The guy with the pinkie does not get it, he doesn't know what's going on,” says Mr. Sjerven. “Even though there are four other offers, he'll offer you $700,000 subject to sale of his home and if he gets financing and everything. Then you get the typical pack in the middle, they'll go around $785,000, or something like that. There'll be a cluster of those people. Then there's the thumb. It sticks right over the side and says, ‘this is my house. I want this house.' He's far enough ahead that it doesn't get into further bidding or anything like that. And he buys that house.”
It's been a typical scenario, these last six months. A buyer sees an affordable listing and makes an offer, but is out-bid by a slew of other offers. Many of those buyers make unconditional offers, waiving the standard home inspection. It's not uncommon for many competitive buyers to bring along a home inspector to the first viewing of a house, just so they can make an immediate offer. Considering that an inspection can cost around $500, those inspections can add up if a buyer keeps losing out.
A few months ago, it seemed like the only houses being sold in bidding wars were the “hot properties,” the ones with three bedrooms up, new granite counter tops, and a gleaming in-law suite downstairs. More recently, the bidding wars have been over houses that aren't so hot, such as that Vancouver Special that went for above asking.
“The house wasn't renovated or anything,” says selling agent Kenny Wong. “It was 37 years old. It had the original “shagadelic” carpets. It was on a 33-by-110 lot. It wasn't even a standard lot.
“I had a hard time selling a Vancouver Special in the winter – a lot of people made low-ball offers,” he adds. “Now they are going over asking.”
Although overall prices aren't quite at pre-correction levels, for buyers it has felt like the spring of 2008 again. Back then, desperate buyers were snapping up properties and pushing prices to a level that kept first time buyers out of the market. On the east side, prices have pushed first time buyers out of trendy neighbourhoods like Main Street and Commercial Drive.
“In some areas… we're back to where we were,” says Scott Russell, president of the Real Estate Board of Greater Vancouver. “But what's important to remember is low interest rates are what is really driving us, no doubt. That's a huge impact to the marketplace.”
With mortgage rates low, and predictions that they'll go up some time next year, buyers are too often panicking to buy that house, says Chris Kowalchuk, a first-time buyer who lost out on an offer on Tuesday.
He bid $700,000 on a two-bedroom east side house listed at $680,000, without conditions. There were at least seven other bids.
“Things are overpriced right now, I think, for what they are worth,” he says. “People are thinking they've got to get in while the interest rates are low.”
Mr. Kowalchuk, a geologist who recently married, is willing to wait until the interest rates start climbing so that the competition will fall away. He believes the current market is a bubble that has to burst.
“I'm looking for a house that I can stay in for at least five years, so I'm willing to overpay a little bit to get the right house.”
Like a lot of people, Mr. Kowalchuk now wishes he'd been in a position to buy in the fall and winter of 2008, when many people worried that the market hadn't yet hit bottom and chose to wait and see what would happen in 2009. By spring, buyers realized that the lower prices and low interest rates made houses affordable again, and the market reacted accordingly.
“My dad was telling us to buy, buy, buy, when everything was depressed,” he says. “But we didn't have time, with the wedding. We put it off until we ran out of time.”
Realtor Mr. MacKay has many clients regretting their reluctance to buy when the market was dead.
“There are lots of people kicking themselves. Not only because the prices were 15 per cent lower, but there was more selection and they didn't get the bidding wars.”
As to where the market will be in early 2010, the current frenzy appears to be abating and realtors like Mr. Sjerven expect the lull to last over the winter and through to the end of the Olympics. Not many people like to list or buy homes around the holiday season, and few are going to want to sell around the time of the Games, when it could be hard to get around.
That five-month lull will create “pent-up demand” that will trigger another frenzy, says Mr. Sjerven.
“Once you clear the Olympics out of the way and we're into April, it will be a race to those listings. Spring is going to rock.”
But first-time buyer Mr. Kowalchuk refuses to get caught up in the hype. He is willing to wait until the bidding wars subside, even if it means paying a higher mortgage rate.
“We're going to keep looking, but we don't want to panic and jump into something just because everybody else is doing that. If it's totally a sellers' market, people will just out-bid each other. People think they have to buy, no matter what.
“I'm thinking by April the long-term rates are probably going to start going up. I'm thinking everybody will panic and stay out of the market.”
From Friday's Globe and Mail Published on Thursday, Nov. 19, 2009 6:03PM EST