Special to The Globe and Mail Last updated on Friday, Sep. 18, 2009 09:37AM EDT
When Vancouver real estate agent Terry Flahiff listed the Kitsilano bungalow a few weeks ago, he knew it would generate interest. Located on the city's west side, the 1926 home featured hardwood floors, a large renovated kitchen, a bright two-bedroom basement suite, a white picket fence and a tree swing.
Sure, the yard was small, the view out the back was a giant condo complex, the bedrooms were tiny - the master was slightly more than 100 square feet - and it was just half a block off one of the city's busiest thoroughfares. Still, those shortcomings were quickly forgiven by the dozens of prospective buyers who streamed through the first open house saying, "Honey, I love it" and trying to imagine life without closets.
Five days later, seven agents lined up to make their offers. The asking price was $959,000, but because of the competition, they knew they had to push higher. Only two bids came in at less than $1- million, and in the end, the home sold for a staggering $1.142-million - more than $180,000 over the original price tag.
"My clients were hoping to get around $1-million or maybe $1.05-million," Mr. Flahiff says. "I think they were very happy."
As neighbours south of the border continue to pay the price for their housing market collapse, it seems that home buyers in Vancouver have forgotten the global economic downturn like it was yesterday's news - and that rush of optimism is fuelling a return to bidding wars.
Earlier this week on the Eastside, a partly updated Commercial Drive bungalow with a two-bedroom suite and a new garage and studio drew 10 offers - most of them with no inspections, despite the fact that the 1926 house needed a new roof, electrical upgrades and drain tile work, and had an old oil tank buried in the back yard. The first showing was Thursday last week, and on Sunday it sold for $113,000 over the asking price.
The same dizzying chain of events is being repeated around the city, where homes are selling in a matter of days, some for prices that sellers could not have imagined just a few months earlier. To make matters worse, many are being bought outright, because an offer that includes subjects (that is, the buyers want a few days to get an inspection or appraisal, finalize financing and so on) just can't compete.
According to veteran agent Rod MacKay, prospective buyers who have been waiting in the wings for the past year feel more confident about the economy and want to capitalize on the record low mortgage rates and reduced home prices before they drift outside their financial grasp. And because of the low mortgage rates, home ownership is now within reach for thousands of first-time buyers who had been priced out of the market, adding to the pressure at the bottom. Meanwhile, sellers aren't jumping in nearly as quickly: A third fewer houses were on the market this August than a year earlier, giving buyers a tough lesson in the laws of supply and demand.
"Prices have moved up 10 per cent in the last six months, so people are worried that if they wait for the perfect house, it won't be affordable," says Mr. MacKay, whose client offered $62,000 over the asking price on the Commercial Drive home, but landed near the bottom of the pack because her offer was contingent on getting two weekdays to finalize the financing. "So if someone is offering on a house that's $950,000, but they can afford $1.1-million, they think they'd better pay it now because that house will cost $1.75-million before they know it."
Still, experts say that even though Vancouver posted record sales in August - a whopping 117 per cent over the previous year - the overheated market is not likely to last. The backlog of buyers will purchase homes, and more sellers will enter the market, marking a return to a more balanced situation.
"The volatility has definitely been very surprising. We expected to see improvement from the recessionary lows, but we didn't see it rising this quickly," says Brian Yu, an economist with the British Columbia Real Estate Association, pointing to a steep decline in mortgage rates and low inventory as the central reasons behind the speedy return to a red-hot market.
"But the Vancouver numbers are showing some signs of plateauing, so the markets are probably going to stabilize over the next while," he says. "They can't increase at this rate forever."