Oscar's quote pretty much sums up what I've seen in the downtown condo market for the past month, and indeed, for much of 2010. Buyers and sellers are scared, but of different things. I myself am suffering from pricing-fatigue and it’s time to set the record straight.
The majority of condo-seller's (wildly-pumping) greed glands seem to have blurred the lines between reality and fantasy. The result is a glut of hopeless luxury condo listings sitting motionless on an over-stuffed MLS at terrifyingly high list prices, which, in conjunction with global economic uncertainty and rising interest rates, serve only to scare already timid buyers back into the proverbial bushes.
Clearly, Buyers are afraid of paying too much. What with the media-driven certainty of an imminent Canadian Real Estate Market collapse while Sellers appear to be afraid of selling at market value and I must say - I understand. Selling at actual market value seems entirely unappealing when compared with the intoxicating idea of huge potential profits, an idea which is sold to Sellers by hungry realtors who appear more driven to bolster their own local star status than to actually get listings sold for their clients.
Caution: Motivation low
So overall, the collective motivation in this segment of the Vancouver market is, at least within the context of my experience, at an all-time low. Buyers "don't need to buy" and "are waiting for the correction" and sellers who "don't need to sell" seem to be living in a parallel but opposite universe are quick to hop on the hallucinatory-pricing train, lead by 35 to 40 Fairmont Pacific Rim "sellers" on any given day.
Listings are Just Listings
Reality check: Listings are just listings. The prices the public sees on http://www.realtor.ca are not "what these condos are going for" and serve only to hurt the overall market. Posting a 12 month listing (actual case at The Fairmont) $1,000,000 higher than its actual sale price 160 days later is, at best, wishful thinking and, at worst, patently irresponsible.
Take another recent Fairmont listing (one of a dozen or so in the tower with identical floor plans) that has objective market value of about $4,500,000. It’s just been listed for $8,000,00. What? How can this possibly be in the best interest of the seller? Well, I guess it looks good on paper for the listing agent. Good for him, I think, or maybe not. I guess time will tell. “Buying” listings by quoting impossible prices to trusting sellers in a potentially down trending pricing environment is not just irresponsible, it’s an unconscionable and a potentially damaging practice. It introduces financial risk not only to the respective sellers but to the broader market in general. Crazy pricing scares away buyers and encourages other “sellers” to over-list, scaring off more buyers and encouraging more over-listing. You get the idea.
Contagion is the latest economic buzzword and from where I stand pricing contagion is everywhere in the downtown Vancouver condo market. For the most part, especially at the luxury end, list pricing is completely out of control and many sellers seem to be choosing their listing realtor based on the highest quote. There’s no talk of how the agent will add value to the sale or how he or she will achieve such fantastic results, just pie in the sky. I guess I’m just old-fashioned in recommending list prices in relation to recently sold similar properties. What was I even thinking, all that data and comparison? … How can I possibly expect that to fit into a Tweet? In any case, Sellers, you may soon be face with a choice: Sell at market value or lose money.
The future while maybe not bright, is at least clear
Despite all the murky mix of daily media messages, one thing is crystal clear: interest rates have started upwards and will most likely continue in that direction. Listing inventory is sitting at between 10 and 20 months in most condo price categories downtown and that spells trouble for pricing in the near term. Wait until next year? That might be good if it didn’t look like we’re heading into another global slowdown. Just as buying a condo to flip is prospecting, so is waiting to sell based on hopes of a brighter future. Both are risky plays.
So what to do?
Decide when it’s time to sell and then price to sell. It’s that simple. Be wary of overly- optimistic price recommendations and ask for justification. If it sounds too good to be true, it just might be. I would be more than glad to help you out with a dose of reality when you are ready to hear it.