It's been awhile since I last published a market update. No excuses - I just hit a writers block. But with the rapid shift in the market in the last few months, it is crucial that the general public understands what is going on, how we got here and where we are going.
Single Family Homes
Following rising prices in 2017 and the first half of 2018, new mortgage qualifying rules took their toll and the Fraser Valley (and Greater Vancouver) markets declined in all housing types from around late Spring 2018 and continued to fall until Winter 2019. Langley detached homes had hit a benchmark peak value of $1.074m in June 2018 and fell almost $100k to a benchmark of $980,300 by January 2019. The highest price until the winter months was in May at $988,000, but declined slightly throughout the year.
It wasn't until November that sellers started seeing the confidence in the market, but this was due to the falling inventory levels more than anything else. Throughout 2019, the sales to listing ratio ranged from 15-20%, but with falling inventory levels, the ratio jumped to 30% which led the same number of buyers starting to compete for less listings.
It is a rare year indeed when November breaks the annual record for benchmark pricing, which is exactly what happened in the Langleys, hitting $990,400, which only increased to $996,700 in December. It was clear that the real estate slump was over and the market was in recovery mode. While murmurs of the coronavirus had started in China, we carried on and so did the market. By February 2020, the typical Langley home broke the $1 million market for the first time since falling under that threshold in Janaury 2019.
THE NEW NORMAL: COVID MARKET
In March, the real estate market was on fire, but by the second half of the month, the coronavirus pandemic began to create a lot of uncertainty, with governments reacting with new announcement daily. Single family prices, however, continued to climb, hitting a benchmark value of $1.027m at the end of the month. In April the world, and the market, paused. Lockdown measures throughout the province were implemented. While real estate agents were declared non-medical essential services, new listings dropped off the map. Those who had to buy, became even more desperate than they previously were.
Prices jumped to $1.039m in April but went back down to the $1.027m mark in May. That was the last time we've seen the benchmark value for detached homes in Langley decline. By July, it surpassed $1.06m and in September 2020, the Langley single family homes benchamrk price broke an alltime record, clocking in at $1.078m, which surpassed June 2018's record of $1.073m. Homes in Langley during the COVID-19 pandemic were officially the most expensive they've ever been.
Obviously it wasn't just Langley. Throughout the region as well as the continent, prices were spiking as inventory levels crashed while the generational buyer demand remained. The winter months showed no signs of relief, as prices escalated even farther.
2021 & BEYOND
By Janaury 2021, the typical Langley single family home cost over $1.163m, with Willoughby even surpassing Surrey's $1.99m benchmark price at $1.206m. Abbotsford posted some of the largest month over month gains, climbing from $896,500 in December to $927,000 in January 2021. There is little doubt that within the next 60 days, the typical Abbotsford home will possibly hit $1 million for the first time. The prognosis for the real estate market for 2021 by industry experts and those within the industry have already shown to be very conservative - similar to early 2016.
As I write this in the second week of February 2021, subject free offers are back. Sellers are under pricing properties by $100-300,000 under what buyers are willing to pay (even if this is known). It's 2016 all over again. Buyers are increasingly frustrated as not only is it hard to win a bid, but sellers are putting such restrictive showing schedules on properties that even getting in to see a property before it sells is difficult.
If you want my preduction for the remainder of 2021, it is, in fact, to look to that year a half decade ago. The underlying problems were, in my opinion, never solved, as two back to back governments looked for scapegoats and quick fixes instead of the hard truths.
Immigration and foreign buyers were never the cause of the ramp of the market. Yes, there may have been a minority element that exasperated the problem, but the generational issue is affecting the entire continent. There are more millennials (approx ages now 20-40) than there were ever baby boomers and they are now solidly in career-building and child-rearing mode, similar to the boomers in the late 70's which witnessed one of the biggest building booms in history (locally, just look at entire neighbourhoods that were built in 5-10 years).
While the boomers first moved en masse for more space and "cheap land" in Surrey, Langley and Abbotsford, the Millennials don't have much more east they can go. The ALR was created in 1973 probably in the nick of time, but at that time, there was still plenty of development land. Today, we don't have this luxury in the Lower Mainland. We can only build up or out and there isn't much "out" left. Chilliwack is fast becoming the equivelant of what Surrey was to our parents - will Hope be the next Langley/Abbotsford? Who knows.
The point is that people who are raising families will buy as much home as their credit liimit will allow them and they will drive until they will qualify. The single family home is fast becoming a luxury for the next generation, as it is in so many cities around the world. If you are patiently waiting for single family home prices to come down - I wouldn't recommend it. Patience hasn't proven to be a virtue in real estate, especially when land is involved.
However, the real estate market does have a cycle and, like 2016, I would speculate that we will hit a plateau later this year whether or not the government gets involved and tries more [failed] experiments, whether by adding on more taxes or regulations. Don't take this as a prediction of a correction in late 2021 - just that we should see prices stabilize after a rough and rockin' summer.
After a meteoric rise from early 2016 where the typical Langley townhome was around $335,000, the benchamrk price peaked in July 2018 at $596,200. However, prices fell quickly in the latter half of 2018 and bottomed out in February 2019 at around $551,000. The benchmark value would range from this to $556,000 and back again throughout 2019, not seeing any positive trends until December.
Gains, however, were minimal, but steady. From $551,600 in November 2019, prices rose to $559,200 by February 2020. Similar to detached homes, again, it wasn't so much that sales were increaes - it was the falling inventory. New home builders had witnessed a poor year and were holding off new inventory for spring and so were resale sellers - there was little inspiration to jump on the market. This left buyers who needed to buy in a lurch, willing to pay more for the limited inventory available.
THE NEW NORMAL: COVID MARKET
In March, townhome prices received a slight bump to cross the $560,000 threshold, with future months seeing greater increases, hitting $575,000 in summer. Prices appear to have stalled over fall, but sharp increases were to show up toward the winter months. In October 2020, the typical Langley townhome was selling for $576,400 and would close out the year at $586,600 with trends in the sellers favour. With new listings falling from a peak of 181 in June to a low of 75 in December, inventory was beginning to hit buyers harder.
2021 & BEYOND
By January 2021, that value had jumped to $593,200. While these are solid increases, the gap between the townhomes and single family homes have widened over the past months. Furthermore, January saw new listings bump back up to 141, giving some relief to homebuyers. With month over month sales steady, with 95 in December and 100 in January, there is some softness to the market that is flying under the radar.
However, inventory is still limited, we are seeing over list sales on most properties and step ladder prices as buyers who have lost out on a previous listing up the ante on their next bid. So far, there are slightly less subject free offers on strata homes, but more and more listing agents are getting strata documents prepared early as they foresee this becoming the norm.
As the Langley and Surrey townhome inventory situation is not as desperate for buyers compared to single family homes, I predict this will change quickly and harshly in the coming months. Similar to 2016-2017, when we have a sharp rise in single family homes, more and more buyers get priced out of the detached home market and either move farther east OR they get priced into townhomes, which brings in high capital buyers.
Additionally, since I suspect that strata insurances on condos will continue to rise at a pace much greater than townhomes, and the condo market will become more volatile, many condo sellers may look to "cash out" of their apartment stratas and use what equity they may have to upsize into a townhome. Therefore, I speculate that townhomes will see a rapid increase in prices probably in the summer months and throughout the fall and winter.
PRE-COVIDThroughout the 2016-2018 boom, apartments followed the rocketing townhome market, with many buyers not knowing anything about the forthcoming strata insurance crisis to come. The typical Langley apartment in January 2016 was $213,200, which was less than it was 5 years earlier ($218,900). In fact, the benchmark value for a Langley apartment was often under $200,000 in those years and never reached it's 2008 peak of $222,600... until single family home prices forced more buyers to townhomes which pushed townhome buyers to apartments.
In March 2016, apartments had reached a new record, breaking the $225,000 mark - and that was just the start. By the end of the year, the typical apartment would be $270,000, and then another $100,000 more by the end of 2017. Apartments peaked in May 2018 at a staggering $427,400 - over double the price of their Janaury 2016 values. However, that would the highest apartments would go. By Janaury 2019, the typical condo would have lost over $41,000 in equity. The first quarter of 2019 would witness a slight resurgence, coming close to $400k before falling again in the latter half of 2019 with the rest of the market.
Langley condos would hit a low point in September 2019 at $377,600. As with other housing types, confidence in the market was restored by the end of the year and condos felt a reversal of fortunes, climbing to over $392,000 by February 2020 as the world started to turn.
THE NEW NORMAL: COVID MARKET
Unlike single family homes and townhomes, the worldwide pandemic saw a stalling in the condo market. Although the benchmark value for a Langley condo crossed the $400k in March 2020 for the first time since falling in late 2018, it wouldn't change much over the course of the year. The typical condo price would dip back below $400,000 over the summer before peaking at $404,100 in September 2020 - far below the $427,400 climax of May 2018.
While some commentators speculate that this is due to people wanting more space due to the pandemic or people are moving in waves from Vancouver to larger homes in the Fraser Valley, the evidence is spuriously anecdotal with little data to back it up. Sales of condos in both Vancouver and the Fraser Valley were actually increasing throughout 2020, not decreasing. Langley condos actually saw it's highest number of sales ever in November 2020. The sales to active listing ratio was also in a healthy (although not extreme) sellers market, ranging from 22% to 38% throughout 2020.
The reality on the ground was the same story: strata insurance. If strata insurance costs were forcing strata fees on more and more condos, this had an effect on what buyers could afford. If a buyer is approved for $400,000, part of this approval is not just the mortgage, but also the strata fee payment, taxes, utilties, etc. So if a strata fee jumps from $280 to $380, that $100 difference is $100 taken away from the purchase. That can make the difference of $20,000 or more in a purchase price. Unlike other variables that can affect a group of buyers (such as the B20 Stress Test), strata fees affect every buyer looking at the housing type.
Although we've known about the strata insurance crisis well before 2020, it only hit a handful of condo buildings hard in the early months. It wasn't until later in the year that we started seeing more buildings struggling at renewal time, which led to new budgets being implemented. So 2020 was truly the first year that received the brunt of the strata insurance crisis.
Langley's condos closed out the year with a benchmark value of $400,300, which, after inflation, was an increase of $10,000 over 12 months and was essentially the same nominal value as prices in October 2018.
2021 & BEYOND
January 2021 saw a slight bump to condo fortunes as the benchmark figure rose to $406,100, which actually surpassed Surrey condos, which fell by a couple hundred dollars. However, with sales falling month over month and new listings coming on the market, the condo market will have to depend on those priced out of townhomes if there are to be future price gains.
Those of you who have spoken one on one with me know that I express significant caution when it comes to purchasing a condo in today's Fraser Valley market. Willoughby, the home of Langley's new condo market, is about to see an explosion of completions this year. I have tracked there to be an estimated 1,850 condos that will complete n 2021, which is almost as many that have been completed over the past 8 years combined. To put this in perspective, 2020 had a record breaking year with 351 MLS condo sales.
Over the past 3-4 months, assignment listings - that is, listings that are up before a unit completes - have made up around 60% of condo listings in Willoughby. Some new building have upwards of 30% of their units for sale. Many of those holding the listings may not be able to complete, as low deposits and no appreciation may take their toll on speculators. These are not positive numbers for the condo market.
I project that with so many condo listings saturating the market, especially those with little difference between them, the ones that sell will be the ones willing to go to the lowest price. As Union Park, Township Commons, Latimer Village, The Residences at WTC, Wyatt, Hudson & Singer, Alexander Square, Yorkson Park and more scheduled to complete later this year and early 2022 (give or take some delays), watch for the real estate condo signs to pile up on the resale side. Don't expect this to be a one year issue. There are 5,444 units (by my count) currently in stream in application stage at the Township in Willoughby alone.
The aforementioned data comes from various sources, including the Fraser Valley Real Estate Board and the Township of Langley. The opinions are of my own and do not represent those of Royal Lepage Wolstencroft or any other industry organization that I may be affiliated with. Projections and speculations are simply that: speculations. I do not guarantee predictions, no matter how dang right I am a lot of the time.
I never recommend playing the market. Buy and sell when you need to and when your life has changes that suggest it to be the right time for you. However, there are times in the market that certain markets may provide an advantage or disadvantage for you to upsize, downsize, move west, move east, etc. If you would like to discuss your particular situation and want an honest recommendation - even if it means that I recommend continue to rent, or to wait out the market, or whatever, I'll only give the ethical opinion that I can back up with data and experience.
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