Looking in the rear view mirror trying to figure out where you are going is often the view for an appraiser. It is much more than that. At times, we need to forecast with the evidence both behind us and anticipated, and sometimes just pure gut instinct and knowing where to find the clues.
I have said many times before the northern real estate market is not for the faint of heart. If you don’t like what is happening wait a few weeks or months — unless you are unlucky, you may be stuck for a few years. We have been riding the bottom of the wave for a while. Just when I think things are looking grim during massive forestry curtailments and layoffs, I start to see or at least hear rumours of high-end sales transpiring once again.
The last I checked, we had 32 active listings of residential properties priced above $800,000. They included eight properties priced above $2,000,000 in the rural estate classification. Out of those 32, the most recent listing was about 12 days ago and the longest listing had been on the market for an impressive 1,143 days. The average days on market is 239 and the median is 166.
As any good appraiser would do, I then confirm how many sales have transpired. According to MLS statistics over the past two years, in the same price point, can you believe six sales were reported as sold through the MLS service? Those sales ranged in value from $850,000 to $1,349,000 with an average days on market of 154.
When the active listings overwhelm the completed sales, this indicates a buyers’ market. This is where it gets tricky in our region. Normally, the sales volumes match the listings within a three- or six-month window in a balanced market. There are often many opposing forces at any given time impacting the consumer confidence. Often people purchase with the intention of buying low and selling high. This rural estate market normally has different drivers. These types of properties are often prestige purchases. Quality custom homes are constructed for the owner/user. I will often ask a people planning on building a custom prestige home if they would pay full replacement cost for someone else’s custom home. Most often the reply is, “No, I will build what I want for myself.” Some people understand their individual capacity and willingness to save their sanity and marriage will take the option and buy a newer home and complete minor renovations to suit their own needs.
Normally, these high end properties are located on rural acreages ranging from five minutes to 20 minutes from the city. I will offer the suggestion and people are often in agreement that they are building a generational home that they have no intention of selling any time soon.
Soon eventually does show up. When it is 20 years later, and the home has been well maintained and modernized, it will likely be a sound investment and sell well. There are times when soon comes sooner then expected and the anticipation of recovering full replacement costs on a super adequate construction are often not realized. If the market is strong and healthy, resale may realize much of the capital cost, and part of the sweat equity. If the market is in the trough of the cycle, then a hearty discount is applied. A lot of variances in pricing can appear in this submarket. Some of the pricing may be emotional while others may be motivated.
So, if the rumours are true, and those high-end houses are once again selling, there is a sense of consumer confidence returning. I guess it is time to look down the side road and realize that there have been a lot of high-end light industrial purchases transpire over the past eight months. This is often an early indicatory of economic activity in the petroleum sector…
So, I begin to look forward and wonder… maybe one more time I will ride the wave to the top, or near top, before I jump off for quieter pastures. Care to join me?
Edwina Nearhood is a lifelong resident of Fort St. John. Her 30-year experience in the appraisal industry offers a unique lens on the challenges associated with the economic forces impacting real estate and the community.