Members of the Winnipeg Real Estate Board get asked all the time:
• “When is it going to end?”
• “Is it a bubble?”
• “When it bursts, what’s going to happen?”
• “When will the real estate market get back to normal?”
In Winnipeg, as well as right across the country, we’ve been in a sellers’ market for over three years. A sellers’ market means there are more buyers than sellers in the marketplace — there is a greater demand for property than a supply of listings.
When this happens, you get more and more people chasing fewer and fewer properties and prices go up and up and up. Dollar volume for the month of June alone has gone up 93 per cent in the past five years, and the average single-family residential sale price is up over 35 per cent since 2000 in Winnipeg!
So, everyone wants to know when normalcy will return. That will only happen when buyers can actually look at a few houses and choose the best for their needs.
Note: Have a house inspection to make sure there are no surprises after purchasing a home.
It’s tough for even the experts to predict when supply and demand will be back in sync. Ask the bankers, ask an appraiser, ask the builders or ask a mortgage broker, the response will likely be the same from all professionals. Typically, the response is a rolling of the eyes, a shrug of the shoulders, and a personal story of a property that sold well over list price, or a couple who have been transferred to town and have been looking for four months and have lost out on seven offers and are still living with their family in rental accommodations.
There are also the stories of someone who bought without an inspection and regretted it later, and of someone who was looking at homes in their price range only to find they no longer qualified for a mortgage after the bidding war ended.
But, we have to remember not to get caught up in the pack-journalism that happens in Winnipeg and all major centres. All of these stories are anecdotal — individual horror stories that are not reflective of the whole market.
In fact, not every neighbourhood in the city experiences the same rate of property value inflation. Some areas of the city have actually seen property devaluations overall in the first six months of the year.
And remember, nearly 5,000 families have bought single-family detached houses in the first six months of the year on the MLS® system, a record for the past decade.
And, anyone who bought a small bungalow in River Heights last June and thought they paid too much — guess what — it has probably appreciated by 17 per cent as of this June!
Will the bubble burst? Is it in fact a housing bubble?
Here are two “expert” opinions from different parts of the world weighing in on this bubble theory. Make up your own minds after weighing the conditions present in our market compared to these two.
Inman News quotes the New York Times about Australia’s “bubble.”
According to the article:
• “In the last two years, Australia’s formerly white-hot housing boom has ended, in a move many experts see as the first signs of the end to a housing bubble, and not just in Australia, but also in the United States, The New York Times reported.”
• “Housing prices in Sydney jumped 16 per cent in 2002 and 23 per cent in 2003 ... with similar gains in other Australian cities ...”
• “But the party’s over, according to the Times, with housing prices nationwide up a mere 0.4 per cent for the year ending March 31, the lowest since 1996 ...”
• “... Looking ahead, local housing experts in Australia expect prices to flatten out, perhaps remaining stagnant for a number of years to allow gradually rising incomes to catch up ... the Times said.”
Diane Francis of the Financial Post sees it differently.
To quote Francis’ column from July 5, entitled, Why Real Estate ‘Bubble’ is Highly Unlikely: Slowdown, OK, but Nothing like the Tech Meltdown:
• “Philip Reichmann’s warning last week to his fellow REIT partners that they should sell their $2.5-billion worth of properties before it was ‘too late’ sent jitters through some markets.”
• “The media has entered the fray, calling the hike in property values another ‘bubble’ in cover stories.”
• “... The value of real estate has more to do with carrying costs, not prices paid, and low interest rates have fuelled the boom. So has the lousy stock market performances. So has the world’s unprecedented economic growth for five years, which has created more buyers than sellers in all the desirable cities or regions in the world.”
• “ Where else are people going to put their savings? In a lacklustre, scary stock market or low yielding bonds — or are they better off buying a bigger house, putting in a swimming pool or building an addition?”
• “... The dangers to values would be a sudden increase in interest rates or a recession brought on by enormous oil price hikes. But even if negative conditions occur and bring about a correction in some areas, this is no high-tech bubble where 80% of peak value was destroyed. Real estate is different.”
• “Homes are more than just an investment. They are enjoyed by their owners and are not just a piece of paper issued by a corporation. Houses also take time to sell, unlike stocks which can be immediately dumped. Housing markets are also regional, as opposed to national or global.”
• “... My bet is that a slowdown, not a dramatic correction, is most likely, given the new realities.”
Bubble, no bubble, white-hot, stagnant or slowdown.
When all is said and done, this is no market to be in on your own. As a seller, you want maximum exposure to all “qualified” potential buyers, not just the drive-bys who happen to see your sign or find you on some obscure website.
You want a network of over 1,100 full time REALTORS in Winnipeg, looking for buyers for your property the second it hits the market — buyers from across the street, across the city, across the province, across the country.
As a buyer you want access to the entire market — access only a full-time professional REALTOR can provide. Access to the entire resale market (exclusive, MLS® and private), the new home market, condominium market, even the invisible market.
A network of 1,100 professionals in the city has heard stories and rumours and possibilities that could lead to a listing that may just fit the bill of a prospective buyer.
The “reality of reality realty?”
MLS® sales activity is up 8.5 per cent from January to June this year, and dollar volume is up by more than 22 per cent and more that 57 per cent since 2001!
Another reality: fewer and fewer are trying the private market where active ads are down nearly 3.8 per cent from last month and down almost seven per cent from June of last year, and new ads are down 7.6 per cent from May and over four per cent from last June.
And, active ads are down 17 per cent since 2001 and new ads are down 10.6 per cent.
Whether it’s a sellers’ market, buyers’ market or normal market, partner with a professional.
Get a REALTOR. Get on MLS®.