Homes that “stand out in a crowd” are still selling….

Slowing sales and rising inventory in Greater Victoria last month show how the once red hot real estate market is cooling down. Market conditions have shifted and after many consecutive years of blockbuster activity and double-digit price growth, the market has slowed, and now favours buyers. Buyers have more homes to choose from than in previous years, resulting in greater freedom to compare the attributes and prices of similar properties in the market before making purchase decisions.

Today, home sellers have to be much more cognizant of the competition between them and their neighbours who are selling. Factors such as how the home shows, curb appeal and a much sharper pencil in pricing are significantly more important today than a year ago. Today’s real estate reality means home sellers must closely watch when nearby properties are sporting “for sale” signs, says the B.C. Real Estate Association’s chief economist, Cameron Muir.

Home price appreciation observed from 2004 to 2007 is less attainable in today’s market, and sellers’ expectations for such gains should be tempered. When it comes to homes that are sitting unsold, Muir said, “A lot of that has to do with homes that were priced according to previous accelerating market conditions, which will tend not to be the best strategy given today’s market realities.” Over-optimistic pricing by sellers will only inhibit the timely sale of properties, adding to inventory levels. The market is currently looking for its new base and this base will be driven by buyers, not sellers.

If a new seller prices a property at 20 per cent higher than one across that street that has just sold, you are unlikely to achieve a sale in a timely fashion using that strategy. It’s expected that homes priced based on the previous market conditions will be repriced or taken off the market as months pass. That will tighten inventory, which is relatively high compared with what we’ve seen in the past three or four years.

Greater Victoria’s sales-to-inventory ratio puts this region on the cusp between a balanced seller and a buyer’s market, Muir said, adding that this area “is doing much better than many other areas in the province. More generally, in a market favouring buyers, prices generally increase at or below the level of inflation. While the average residential home price in BC increased at a healthy 6 per cent per year since 1981, large gains are often followed by periods of price stagnation.

Despite current buyers’ market conditions fuelled by housing affordability constraints and economic uncertainty, the economic and demographic backdrop in support of housing demand remains strong in BC. BC’s unemployment rate remains near record lows, while the labour force participation rate hovers near historical highs. Meanwhile, the province remains a favoured destination for new migrants, reflected in the third-highest population growth among provinces during the first quarter of 2008. However, challenges continue in the forestry sector, and eroded consumer confidence may also be playing a role in a pull back of consumer spending.

Should you want to further discuss the market, or have any question regarding your own Real Estate needs, I would be happy to be of service. Call me…