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These are the realities of supply and demand


Blog by Robert Matthews | May 18th, 2021


Limited land. Limited interest in increasing housing density. Good employment. Generous residency / immigration policies. Top ten of the most desirable places to live, in the world. Metro Vancouver real estate is in demand, and I don't see that changing. What can change, however, is the delicate supply-demand balance. If the market is in balance, there's sufficient supply to meet demand. As a result home prices are stable or rise much more slowly, buyers do not feel rushed, and sellers know they can find their next home with ease. This balance, however, can easily tip, to dramatic effect. Over the past year we've seen the balance teeter significantly, with historically low interest rates and the much-reported need for "nesting" (e.g., getting into a home of one's own, particularly one with space and a bit of land) bumping up against current homeowners' desire to hunker down and stay put. At some point, supply-demand will stabilize, or tip the other way, only to begin the cycle all over again.

Today's low supply and high demand has led to many buyers chasing few listings. And when this happens, the competition can be intense. From the seller's perspective, the process can be quite exciting! From a buyer's perspective, frustrating and disappointing. Keep in mind that sellers most often will become buyers, and often buyers have been sellers, or will be at some point. So the perspective changes.   

In this type of market, with demand exceeding supply, buyers need to act fast and have their ducks in a row before offer day. Most importantly, every buyer needs to be fully pre-approved, at the price they intend to offer, by their mortgage broker/bank prior to even thinking of offering. Without this, and in this type of market, any offer made will just not be competitive. Buyers are up against other buyers, many of whom effectively have cash (from a recent sale, from savings, from family, approved financing, etc.). And sellers are more likely to take the sure thing: A no-subject offer, rather than one subject to financing. Once the offer is firm, a bank appraisal of the property will likely still be required; however, frankly, this is – and my mortgage broker friends will shudder at this! – typically considered a formality for a fully approved buyer when multiple offers have set the sale price. Unless the offer price is much, much higher than very recent sales nearby, it would be rare for the appraisal to not mirror the sale price. In this competitive market, most buyers do indeed treat the appraisal process as an after-the-fact formality, rather than risk offering "subject to appraisal".  

In most cases a buyer does have the opportunity for proper due diligence prior to offering on a home, multiple offers or not. Typically, most newly listed homes specify at least one week between first listing day and offer day. Buyers can request to do a home inspection, prior to offer day. Yes, this can cost, and is frustrating if the subsequent offer is not successful. Unfortunately, this is the reality when so many buyers are chasing so few listings.

Much has been written recently about "blind bidding" and the multiple offer process. A more conventional "open auction" process (where buyers know competing bid amounts) may improve transparency for buyers; however, it will not change the supply-demand situation, and the resulting price level increases (although it might slow the increases for a time). The reality is, blind auction or open auction, one buyer will be successful and that most often means the one willing and able to offer a higher price and/or better terms than his/her competitors. 

There is so much more to the buy and sell process than I can hold your attention long enough to describe here! Suffice to say, with 20 years and more than 600 sales, you'll be glad I'm on your side. If you plan to make a move this year, early preparation is key, and a chat with me would be a good first step!