Wow... What a year 2020 was.

Despite all the negatives of 2020 which we really do not need to dwell on here as I am sure you are all more than well aware of, 2020 was quite an interesting year when speaking about the real estate market.

2020 saw a total of 19,926 sales in the Fraser Valley Real Estate market, making it the fourth highest selling year in the past 10 years.  That may not sound like much, but we must keep in mind that April and May were record setting months for the lowest number of sales in recent history for those given months. Speaking of records, September, October, November, and December all set new records in the Fraser Valley for the total number of sales.

December 2020 processed 1,963 sales coming in 81% higher than the 10-year average for the month and blowing the second best, December 2015, out of the water by 532 sales. To put this into more perspective, no month on record prior to June 2015 ever had more than 1,713 sales… in simple terms, a lot of homes sold in December 2020 and in 2020 as a whole.

While sales have continued to smash monthly records recently, we have been seeing average or slightly below average number of new listings coming onto the market. Typically, this would cause prices to skyrocket as they did in 2015-2018, but this year has been a little different. HPI benchmark prices for the average home have increased year over year by 8.5% From December 2019 to December 2020, which is much lower than the 25% year over year changes we experienced just 3 years ago.  There are a lot of reasons for this discrepancy, but in simple terms this is indicative that prices are right where they should be for a healthy market.

I have seen predictions for 2021 telling us that prices will increase by 9-11% but I would estimate that we will see a year over year increase closer to 4% by the end of 2021. For the same reason that prices did not increase in 2020 as much as they had under similar circumstances in prior years, I think that the price of homes today is nearing a short-term equilibrium between demand affordability and availability.

I would predict that prices will likely remain stable and increase by about 2.5-5% for the next few years, before they take a bit of a turn down in about 3 to 5 years.  With that in mind, we are likely seeing the lowest prices today that we will see into the foreseeable future, so if you are waiting for prices to come down, you may be waiting for a very long time (like forever long).  This of course is simply my prediction and it is absolutely possible that this could be wrong but based on the history and other numbers I do not see any reason for prices to drop below where they are today.

The small drop that we will see in about 3-5 years will be due to less demand on the market caused by the massive decrease we have seen in immigration numbers due to the pandemic.  Immigration takes a few years to affect our market due to the foreign buyer’s tax. If a new immigrant purchases a home they would have to pay the purchase price PLUS 20% for the foreign buyers tax. Once permanent residency is granted, that tax is waived, and it takes a few years for new immigrants to get a permanent resident status. That simply means that we will have about 3 more years of new permanent residents entering the housing market before we see the effects of the lower immigration numbers.

To add to the immigration numbers decreasing, the group hit hardest by layoffs from the pandemic were in the entry level workforce… the same group that would likely have the largest portion of first-time buyers in about 5 years’ time from now. The year of layoffs in this demographic will likely be felt in the market in the future, but will not have as much of an impact as immigration.

In contrast to why prices will see a small decrease in the future (remember, this decrease will not likely take us below today’s prices) we may be on the verge of an economic recession. Many would think that a recession would cause house prices to decrease, but history would say otherwise. As I have mentioned before, 2008 was a unique recession in terms of housing as the housing market was one of the major causes of said recession. In most recessions throughout history, house prices have actually increased as investors take their money out of stocks and reallocate them into real property.

Apartments saw the smallest increase year over year in both the number of sales as well as price, and this is likely due to the recent spike in strata insurance.  I do think that this will correct itself into 2021, as the first time we saw the large increases was September 2019. Four months into the new cycle of insurance renewals, I have not seen any cases of drastic increases in prices of insurance in buildings that did see a large increase in the end of 2019. I speculate that a large factor of the increase in insurance prices is due to property values nearly doubling from 2015 to 2019, yet we did not see insurance premiums come even close to doubling until last year. It is certainly possible that I could be way off on this, however the lack any significant change so far would lead me to believe this to be a likely scenario. If this is in fact true, I predict that condo prices will increase by a greater percentage than detached homes in 2021 to make up the discrepancy we saw in 2020 between detached increasing by 13% and apartments increasing by only 5%.

Detached home and townhouse sales will likely stay strong through 2021 as the shift to more and more people having the ability to work from home indefinitely is continuing to increase. I have mentioned this as a factor for the increase in detached house prices for the last several months, and in my business and speaking to other agents it does remain to be a factor in the minds of many buyers who have sold their condos or apartments and are moving further east in the Fraser Valley.

2020 was a great year real estate-wise for most anyone who made a move, and 2021 is looking to shape up to be a great time to make a move as well. Are you planning on making a move this year? Let me know sooner than later and we can start making a plan now, so you are ready to go when the time is right for you!