Going, going, still going: is this the end of house bidding wars?

The great pandemic home chase may finally be over.

Almost exactly two years after it began, home prices have finally begun to fall across the Fraser Valley as people stop snapping up homes.

Although townhome and apartment prices continued to rise slightly last month, house prices across the region dipped for the first time in two years, according to figures from the Fraser Valley Real Estate Board and Chilliwack and District Real Estate Board. Prices are still higher than they were two years ago, and now a driving question is whether they will continue to fall. If they do, apartment and townhome prices are likely to follow. But the future is hard to predict: after the region’s last housing frenzy, the cost of homes levelled off for several years before unexpectedly taking off again when the pandemic hit.

A balanced market?

The cause for the decline in sales is simple: far fewer people are putting in offers, especially those of the million-dollar variety. Homes are staying on the market longer and, in general, no longer generating the bidding wars seen last year.

Between Langley and Hope, 903 homes sold in April. That figure is (almost) exactly half of the 1,807 homes that were sold in April of 2021.

Although new listings are also declining, the plunge in sales means there are far more homes available to buy than last year. In particular, Chilliwack and Mission have seen the options for buyers balloon. In Chilliwack, there were nearly 1,000 homes listed as of the end of April. That’s up from around 700 during the same time last year. In Mission, there were 221 homes listed, up from 132 a year ago.

Houses in particular are competing for fewer would-be buyers. Last month in Abbotsford, 243 new single-family houses hit the market, while just 76 were sold.

That has led the Canadian Real Estate Association to deem that the local housing market to finally be in “balanced” territory after years of favouring sellers. One recent analysis suggested house prices are already dropping by more than 10%, though that may be influenced by a lack of very-expensive homes being sold.

But just where the house prices go from here is still unclear.

The last Lower Mainland housing frenzy lasted nearly four years—roughly from the summer of 2014 to the middle of 2018. Over that time, average house prices in Langley rose from around $575,000 to more than $1 million. In Chilliwack, they went from $340,000 to around $600,000.

By 2018, it seemed like prices couldn’t climb any higher. And they didn’t for two years. But despite fewer people buying and more people trying to sell, prices mostly held steady. They declined a bit to 2019, increasing only marginally in early 2020.

Then the pandemic hit.

Two years later, the future depends on interest rates, mortgage rules, and, especially, public expectations.

The demand for housing depends, in large part, on whether the majority of would-be homebuyers think prices will hold steady or decline substantially. The more who believe the latter, the more prices are actually likely to decline, as people wait to buy. But others might think a slight decline is the best they can hope for and choose to buy now.

As always, if you can see into the future or read the collective minds of five million people, there is money to be made (or not lost).