As crazy as Seattle's real estate market has been, Vancouver's is arguably more extreme - and may be imploding in an extreme fashion. What else would you call a 20 percent drop in one month?
Anecdotes are turning into data. According to a Global News report, some markets in Vancouver have dropped 20 percent in the last 28 days, and 24 percent in the last 90 days. The number of deals has dropped over 90 percent, meaning some neighborhoods only saw three sales in a month. As scary as that can be for sellers, and as much of an opportunity as it can be for buyers, it appears to have a specific cause hitting a specific market niche.
Since 2001, Vancouver has seen considerable wealth pouring in from China. Just like in Palo Alto and London, wealthy Chinese are buying houses as investments and way to store wealth. Recently, they accounted for 15 percent of Vancouver's sales. With a benchmark home price of CA$3.4M and a median income of about CA$84K, an affordable housing shortage was created.
The solution that prompted the implosion was a 15 percent foreign buyers tax that went into effect in July. Abruptly, Vancouver sales halted while everyone paused to consider the possibilities and implications. Already, other Canadian places became more attractive, particularly Calgary and Alberta.
The good news for local buyers is that the bubble may have burst. As dramatic as a 20 percent drop can be, however, it takes months for contracts, appraisals, applications, and expectations to adjust. The drop may actually be bigger when measured across the entire market. Conversely, the drop actually may sound more dramatic than it is because the biggest market retraction is in the high-end luxury market. More moderate homes may be telling a different story, but no one can hear it until the more dramatic story plays out. In the meantime, everyone becomes more cautious.
One caution for Seattle's market is a reminder how abruptly markets can switch. Experienced agents and homeowners have seen major corrections before. With Vancouver as an example, would we do something similar and as abrupt? Probably, not. We're also fortunate to have an active economy, for now.
One consequence worth considering is whether Seattle may attract some of those foreign buyers. They may have specific tax incentives for choosing Canada over the U.S. (or maybe they just like Canadians and hockey); but, Seattle's housing market already is experiencing demand from places like Silicon Valley, and already has significant appeal to foreign buyers. It wouldn't take much to at least make them look. More demand without more supply typically means higher prices - as if they weren't already high enough, already.