April 28, 2022

Canmore, AB – “I think we should sell our house!”

Can’t read the full email – click here for the online version.

This was the beginning of a conversation I had last week with my wife Jan. She was all excited from conversations she had had with neighbours and friends of ours.

One such discussion revolved around a nearby bungalow of maybe, 1100 square feet, in a less desirable location (than ours) that listed! for $1.2 Million but sold for $1.53 Million, in under 3 weeks.

More than 20% above the asking price!

The average selling price of detached homes in our area has increased 78% since the beginning of 2020. For Canada as a whole, prices have moved up 50%!

OK! That got my attention. And some questions.

Obviously, the real estate market had become frothy in our 6-month absence.

But why? Will it continue? For how long? What would/could cause it to crash?

And the $64 question …. Where would we live and what about our daughter - and the dog?

Turns out this is not a local event. You have likely seen the same thing in your town or city. If you’re a homeowner, maybe you are thinking you should sell too.

Turns out there have been 3 principal drivers of the current anomaly.

1. Abnormally low interest rates.
    
2. Forced lockdowns – thus an increase in work from home -> a “zoom” boom.
    
3. Low inventory of homes for sale – partly due to lack of sellers and partly due to a lack of new construction (nationally in the US and Canada anyway)

Interestingly, “There were actually fewer homes listed for sale on Canadian MLS® Systems on New Year's Day 2022 than at any other time in the database's history going back to the 1980s.”! – source, Canadian Real Estate Association

This leads to questions of: will the rise in prices continue and for how long? Won’t the increase in interest rates make it more expensive for borrowers and decrease how much house a new buyer can afford to buy?

The intuitive answer is “Yes”, of course.

But locally in our little “tourist” town – that answer is not so straight forward.

Here, inventory is sitting at only 60 total units (including condos and townhomes) versus a high of just 3 years ago of 500.

More importantly – purchases have been “cash offers” – no conditions! The buyers have enough resources, they are not reliant on normal financing arrangements.

I think this will continue. A sentiment shared by my friends’ who are in the local real estate business.

You see, our town has a unique advantage over most locales.

• It is small, yet has enough shops, restaurants, cafes and bars that it can keep tourists after the allure of the mountains and outdoor activities has tired them out.
   
• It is only 75 minutes from an international airport.
   
• There is a large city of 1.5 million people within an hour and another 2 million within 3 hours.
   
• There are only a handful of other towns that have similar characteristics.

In short – our town has a real “Market Dominating Position”.  Its resources are scarce. It is seen by buyers as a “deluxe” locality.

So, it commands premium prices.

How does your business or practice compare? Do you obtain premium prices? Do you serve a clientele who “line-up” to buy what you sell? How well positioned are you if economic activity decreases?

If you don’t have a Unique Position, what are you plans to create one?

Until next week…

Stay healthy and focus on profit!

- Hugh
The “Profit Accelerator” Expert

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