If only we could see the future! Clients ask me every day. No one can predict exactly what can happen in the future. However, strong analytics, economic and industry knowledge, historical trends, government policies, local area knowledge and statistics, Real Estate expertise, ability to look at things from a big picture, macro and micro economics, related news, and education can all come together to give you that “gut feeling” of what is to come. Most resist going out on a limb and making predictions for what is to come. Well I’m not that bashful so here goes…..
Some key points;
2020 was full of so much that was unexpected, on so many levels. The onset of the COVID-19 pandemic in March and April quickly swept away any illusions that our normal seasonal market patterns would persist. The spring market of flowers and For Sale signs did not materialize. Sales dropped by 75% but home prices remained firm. Showing requests dropped 95% from Mid-March until the third week of May. New listings dropped to a just a few a week vs the typical 8-20 per day that time of year. Equally surprising was the resurgence of our market in early summer when restrictions lightened, and pent-up demand began pushing sales beyond expectations. Many non-Island residents were swooping in and buying up properties. Added value was placed on land and privacy, clearly a fear-based response to being in larger population bases. Also, with the work-from-home shift many people were looking to improve that situation by purchasing homes with better office situations, home gyms, and better suited work-live arrangements.
The combination of the ongoing pandemic, historically low interest rates and a shift in consumer priorities towards properties that cater to a more home-based work / life / retirement balance resulted in record setting sales for the last several months of 2020.
We roll into 2021 with still many unknowns. A vaccine is beginning to make its way through the population. The Bank of Canada has changed their stance several times in the last 6 months; first stating (pre-vaccine) that they would not consider raising interest rates for some time, potentially 2023. Then, with the announcements of the vaccine starting, this shifted to a potential increase in 2022. Obviously, this year will dictate policy. If the vaccine shows to be effective and safe it should become more and more accepted. With that a more confident marketplace. And then rebuilding. Consumer debt as we close out 2021 should be a clear indicator of policy moving into 2022. For now, I wouldn’t expect to see interest rates go anywhere this year. If this comes to fruition, those in strong financial positions will continue to leverage the historically low rates and borrowing power to improve their portfolios. The challenge for this year will be inventory, as it has been continuously for the last 5 years. We need our community leaders to at least match the development of new building to the incoming level of new Islanders. The teeter totter is year after year getting heavier on one side. Demand is outweighing supply year after year, which is putting pressures on housing prices, continuing to push them up and up. Until we see supply surplus, I do not expect any softening of home prices into the future. If surplus continues to be less than population growth, then home prices will continue to grow into the future. Simple supply and demand. You can bank on it!