"Real Estate Constipation!"...What is it? and When will it end?

As many of you know our market has slowed down dramatically, especially in the higher price ranges. This is due to the changes in immigration ownership and tighter registration rules. However the greatest impact is due to the recent fast rising interest rates. In 1980-81 our market collapsed by 40-60% in only 11 months due to these rising interst rates. At that time rates went up by an amazing 89% during this time period. Homeowners were being foreclosed left, right and center. People were walking away from their car loans. The economy was suffering from run-away inflation.

Today, I think there are some distinct similarities. We have had run-away inflation and we have had fast rising interest rates. Many of my clients and peers say; "Oh no Brent, you don't understand, it was because the rates were 21.5%." No, the market did not collapse due to the 21.5% rate, it collapsed due to the inability of the buyers to qualify for the those higher rates. I would suggest that is the same situation as now! Today interst rates have risen by a staggering 195% in 16 months, far great than the massive increase in 1980-81 Buyers today trying to borrow money are 45% offside compared to what they could have qualifed for 18 months ago. That means if you could have qualifed for a $2.0 mil home then, you now are struggling to qualify for a $1.1 mil home today! How excited do you think those buyers are now? Similarily, the seller who might have had a boatload of buyers a while back at his elevated price, is now being forced to come to grips with a number substantially lower than before if they actually want to sell.

"Listings" are down well below historical norms in many areas. This is why the prices have not dropped as much as the lack of qualified buyers would suggest. In the near future I suspect the rubber will meet the road as many homeowners with with re-newing mortgages, or ones that are on floating prime contracts that have banks calling them to up their payments, will eventually see their anxiety levels greatly increase.

There is one thruth that you can take to the bank!...when buyers feel urgency to buy, "Oh my God, if I don't buy now, I might never get into the market," you can count on the market going up! When the Seller feels urgency, "Oh my God, if I don't sell now, I might never get out of the market," you can count on the market prices going down!

We are in a very stagnant portion of the real estate cycle right now. Nobody is happy! Sellers can't get the prices they could have got 18 months ago, and buyers can't qualify to buy the homes they could have 18 months ago. Furthermore, renters are getting screwed with the ridiculously high rents that investors are charging. I call this current situation..."Real Estate Constipation!" Until either the buyers or the sellers develop some signifigant urgency, this stagnat market is likely to continue.

Never before has it been this important to get properly informed I have been doing that for 40 Years! There is no substitute for Experience! Please call me anytime at 604-644-0065.