SethM [aka Greenhorn the video archivist] at RE Talks 24 Feb 2011 10:39pm –
“A lot of people want to sell right now so that they can upgrade to larger, nicer homes. In a hot market, it is better to upgrade before prices increase too much as the relative difference (between your new house and old house) gets amplified. Lots of homeowners fear being priced out of their upgrade/dream home because Mainland Chinese are putting upward pressure on prices.
Let me give you an example Vanpro. You have a $700,000 home but really want a $1,400,000 home. The price difference is $700,000. Let’s say you wait 10 years. Your home is now worth $1,400,000 but your dream home is now $2,800,000. The price difference is now $1,400,000. For some upgrade buyers, they won’t be able to close the gap.
I have friends who are panicking to upgrade before the Mainland Chinese price them out and before the mortgage rules change.
You may see listings increasing, but these sellers will be buying more expensive homes. Expect to see prices rise with increasing listings in this scenario.
It is perverse, but this is how Vancouver real estate works. This market is different. It really is.”
Opinion and anecdote from SethM. [hat-tip to jesse].
Note that the anecdote part is about locals extending themselves even more into RE based on two beliefs –
– 1. “Prices will continue to increase.”
– 2. “The mainland Chinese are going to price us out.”
The first belief has driven almost all Vancouver buying for 5-6 years.
The second has increasingly affected buying by locals, even moreso this past 1-2 years.
Regardless, we have people buying for speculative reasons. (They are paying stratospheric prices based on the belief that prices will continue ever upwards, not based on the utility of the property.)
Note that the sentiment mentioned is now ‘panic’.
Panic buying. When does that happen in the RE cycle?