Real estate tipping point? Time to diversify.
Was that it? Peak house?
There's a slight chill in the air. Maybe you have felt it.
Maybe all of the FOMO idiots have been used up. Perhaps as we the sheeple get dosed and companies resurrect offices, everything changes. It could be that we have hit a home price wall. Maybe escalating mortgage/interest rates and a stiffer stress test have buyers thinking twice. Or perhaps realtor carelessness, blind auctions, and vendor cupidity have pushed things too far, and buyers reached their limits. I don't know. But look at the numbers.
We now know there were 13,663 monthly sales in the GTA in April. As realtors touted, "it was a new record for April and amounted to more than quadruple that from April 2020". But hold on. Sales back in March were 15,652. This drop month over month represents a 13% decline in what, by tradition, has been the strongest month of the entire year for house buying.
Not only did the level of deals dissipate, but prices flatlined in April, after plumping continuously month after month during 2021. Here's how the real estate board justified the surprising news: "We've experienced a torrid pace of home sales since the summer of 2020 while seeing little in the way of population growth. We may be starting to exhaust the pool of potential buyers within the existing GTA population. Over the long term, sustained growth in sales requires sustained growth in population."
But wait. The population of the GTA has indeed grown over the past year – by 57,000 people. There are 6.25 million in the vast megalopolis now – so this meme of a stagnant base of potential buyers looks like realtor bunk. And while monthly sales were flat, listings have blossomed over the last two months, adding 7,382 in March and 7,664 in April.
What about Vancouver? In April, there were 4,908 transactions – a decline of 14% from March. While fewer buyers took the bait last month, way more homeowners decided this was the time to unload. "There were 7,938 detached, attached and apartment homes newly listed for sale in Metro Vancouver in April," said the realtors. "This represents a 243.2% increase …and is the highest new listing total ever recorded in the region in April."
Plus, check this out: the sales-to-listings ratio for detached homes on Van in March was 53%. But last month that dropped considerably to 37.4%. I think this might have something to do with the fact the benchmark detached home price is now $1,755,500 – up 21% in a year? Duh.
Higher home values, lower sales! Hmmmm. Happening in multiple regions of the country and specifically in hot spots. This is often a classic warning sign of the peak of a market.
But is it?
Let's presume many buyers have decided to sit on their hands and wait for the greed storm to subside. After pounding each other in horrendous, casualty-strewn bidding wars, many have just given up. It's emotional to craft an offer for tens (or hundreds) of thousands more than a listed price, certify a $100,000 cheque to go with the bid, then wait to see if your name is the one picked in a process as cloudy and dark as an agent's heart. (Okay, perhaps not all of them.) It's no way to buy the biggest asset of your life and plunge into epic debt.
And now, as an exit from the pandemic becomes more certain, higher numbers of owners are looking at insane valuations, concluding if there were ever a time to bail, this be it. As stated, peak house.
Oh, and by the way, it was only over a week ago that US Treasury Secretary Janet Yellen – the former head of the American central bank – said interest rates are almost certainly going up. The reason is simple: "to make sure that our economy doesn't overheat."
Yellen is stating the obvious. Her boss, the vieillir rapidement vieux mec Biden, (Look it up. At least I am trying 😊), is spending $6 trillion on Covid relief, resurrecting assistance, infrastructure and enhanced social programs. At the same time, households have a giant pile of savings to set free after a year of pandemic lethargy and lockdowns; corporate profits have soared, and inevitable growth in global GDP will fuel trade as billions get vaccinated. On the heels of this, there are already several Central Bankers that have indicated rates will rise a year sooner than previously anticipated because we'll quickly see official inflation numbers treading higher, along with employment rates.
In summary: houses cost so damn much young people cannot afford to buy. The real estate industry has reached a new dirtbag low with ubiquitous hold-back offers and auctions. Listings are flooding onto the market, significantly increasing supply. The cost of money has but one direction in which to move. WFH has only one way to go. New regs reducing the borrowing power of buyers will soon arrive. Sales in April – the pinnacle – fell in our landmark markets.
Have we hit peak house? We'll know soon enough. It's still a seller's market. So, sell. Make a note of the importance of diversifying your wealth. I am not the end-all that says all. But during the first decade of the 2000s, in a time in which before the 2008/09 global financial trouble, and for a short while afterwards, up to 2011, these real threats of higher interest rates, global greed creeping back in the traditional markets, higher house prices, and a fear of possible inflation did this to Gold and Silver prices:
Silver: 2002 - 2021
Gold: 2002 - 2021
If you are reading, you are either uncertain, fearful, already an owner of Gold and Silver or a combination of all of the above. Either way, there is a reason you read this far down the article. The question is whether or not you want to do anything with this knowledge?
Do your due diligence to determine if the risks involved in owning Gold or Silver are admissible to you and your wealth and if they are; then we are more than happy to discuss options with you at Delta Harbour.
Yours to the penny,
Darren Long