Of course, everything is dependent on supply and demand, but falling prices are triggered by sellers who “have to sell”. When demand slackens, like it’s doing right now, the market tends to get a bit flooded with product. Out of the many hundreds of sellers, a few can be categorized as “have to sell”, while others are just testing or don’t “have to sell”. As time wears on, buyers have more selection and don’t feel pressure to act. This causes buyers to be less willing to commit, even when they find a great property. Sellers who “have to sell”, see this happening and will react in the only timely way they can, they will reduce their price.
Examples of sellers that “have to sell” are foreclosures, estate sales (perhaps), sellers that have bought already, sellers that are especially motivated to make a change in their home and sellers that just need the cash. Out of the hundreds of sellers on the market, I’d say 25% could be motivated “have to sell” sellers.
So, when demand falls and supply increases, sellers that have to sell must go to the market. They must price their homes to entice reluctant buyers to commit. This will happen over and over again until the market gets into a more balanced situation. It’s happening right now in this current market cycle, it has to. Prices are down from their peak by about 15% in Coquitlam, Port Coquitlam and Port Moody. Its up to buyers as a collective whole to decide how far prices fall. When the collective whole feels that homes are a good deal, they will start to buy again.
This current downturn in demand is not being caused by typical factors like rising interest rates or falling wages. It’s being caused by general buyer sentiment. In other words, it’s a crisis of confidence. That tells me that buyers will return to the market in larger numbers when prices have fallen to a point where they seem like a good deal. That sounds simplistic I know, but it’s how it is.