The Fraser Valley, which was arguably BC’s hottest housing market in 2017, and a large benefactor of ‘the drive to qualify’, appears to have taken an unpleasant turn in recent months.
The drive to qualify is phenomenon seen in every housing boom, it’s the process of moving far away to a region where real estate is more affordable and where one can actually qualify for a mortgage. This drive is often led by a fear of missing out as prices inflate across the city, creating a speculative mania enhanced by stories to justify the ever increasing prices.
As buyers scrambled to enter the market, sales surged hitting an all time high in 2017 while inventory simultaneously plunged to record lows. From January 2016 to January 2018 buyers drove the typical condo higher by an eye watering 88% Per the MLS benchmark.
The rapid increase in prices and record low inventory spurred real estate developers into action. Housing starts in 2017 hit a fresh high, reaching over 9200 units, surpassing a previous high set in the last housing boom which ended abruptly in 2008.
However, with credit tightening and a barrage of policies aimed at cooling the market, buyers have retreated.
While condo sales are still above the ten year average, they have taken a steep decline, dropping 50% year over year in October. This trend has been going on for several months now and has allowed inventory to climb 153% from last year.
The recent run-up in inventory has been particularly concerning in parts of the Valley, including Langley and Abbotsford where it has surged 405% and 208% respectively. The swelling of inventory has left sellers desperate for a buyer, even for the once popular pre sale condo, which is now offering increasing buyer bonuses.
As a result, the benchmark price for a condo in the Fraser Valley has slipped for four consecutive months, the first time doing so since 2008. Given the recent outlook, one can’t help but ponder how much of the recent run-up in the Valley was built on speculation and overly optimistic projections?