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However tantalizing the drop in price may be, economists and experts warn that using averages in real estate prices is inherently problematic.
“That’s a really bad idea,” said UBC economist Tsur Somerville, who adds that the drop in average prices may be due to a drop in high-end home sales.
“Averages are always tricky to use, because when you have sales at the high end they have a way of skewing the value of homes that are sold, and that’s really particularly the case in Vancouver,” said Yan.
Allen says their data showed the market had already started to turn before the foreign buyer tax.
“It’s only slowing down at the top where there is uncertainty,” he said.
And that uncertainty is “diabolically dangerous,” according to Eilers, who has sold real estate during four different correction periods in Vancouver.
“When the market changes, it typically changes over night or within a couple of weeks, but it often takes two to three months for everybody to figure it out. That’s why it can be so scary,” he said.
A strong price correction often takes months to appear because sellers are unwilling to lower their prices until they have to.
According to the realtor, often sellers have their houses appraised months before they put them on the market, meaning in the climate we are currently witnessing, sellers are expecting to list their homes at record-high prices, even though the number of sales and listings indicate prices should be lowering.
“Typically what happens when the market starts to flip is all the buyers go into hibernation and all the listings come on. What are the odds on getting that seller to price his home at a fraction of where the market is now? It’s zero,” Eilers said.
What causes prices to fall is “urgency, anxiety, and fear,” according Eilers. He says a climate of financial overexposure, a treadmill of buying and selling and flipping homes, owning multiple properties, and buying before selling will test how long sellers can hold on without selling in desperation.
http://globalnews.ca/news/288776 ... arket-in-free-fall/ |
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