Market Analysis

Current Market Conditions

September 2007.

For many people, September is the true "new year". It's probably a left-over reaction from
all those years of schooling. The calendar might begin on January 1st, but the "new year"
is really the first of September, and the beginning of another academic year. Old habits
are hard to break!

In real estate, on Salt Spring Island & the Southern Gulf Islands, which have evolved into
secondary home/destination venue markets, September is also the beginning of a "market
trend" for a year that seems to go from late August/early September into the late
Spring/early Summer of the following year. Spring 2008, then, will inherit the trend that
will fill in during this Fall of 2007.

It appears that we may still be in the "flat time" of a middle moment in a market cycle.
For this area, the market began a rising pattern in the Sprng of 2001. From that early
Spring to about mid- year of 2003, sales volume went up about 60% and sale pricing rose
about 20 to 30%, depending on the property involved. Appraisers noted that prices doubled
between 2003 and 2005.    

Then, beginning around the end of October, in 2005, there was the start of a plateau
period. Middle moments in a market cycle are often characterized by "flat" periods. The
Wall Street Journal, in January of 2007, described it best, I think, when they noted that
all of 2006 had been "stable/inactive", globally.

No one knows how long a particular segment of a market cycle will last. In early 2007,
there was a resurgence of activity, but mainly in the low to mid-range priced property
options, on SSI. Of the "higher end" choices, although they may have completed in early
2007, their beginnings could be traced back to late 2005 and early to mid-2006. It was the
culmination of business, then, in early 2007, not "new business".

Such a "plateau" or "pause" period can sometimes be misread as a "dipping" in the
marketplace, and many articles were written, throughout 2006, which promised just such a
dip. It didn't occur. It was stable, and it was relatively inactive, as buyers chose to
mull and shuffle, and to consider their options.    

The latter part of a market cycle starts with continuing "thin" inventory, and few choices
for a buyer to consider. Eventually, though, sellers who aren't interested in remaining
owners will decide to list, the inventory will grow, and buyers will be able to be more in
control of the outcome of a price negotiation. The latter phase of a market cycle might
last two to three years.    

When the stock market side of investment is in the doldrums, though, we find that "hard
asset" is in the upswing, for investment interest. Real estate, then, is up when the stock
market is down, and vice versa -- it's a teeter-totter market scenario.   

With concerns over the stability of paper currency, and the worry over the subprime
mortgage problems in the U.S., and the continuing wild volatility of the stock markets, we
may find that real estate, in specific and protected areas, such as on Salt Spring Island
and the Southern Gulf Islands, will continue to attract that global buyer.

Our market, here, is not "local". In the main, the buyers are from "out of province". It's
important to be aware of conditions in the areas the buyers come from, then, and not just
to focus on B.C.'s economy.     

Salt Spring Island & the Southern Gulf Islands are recipient marketplaces. No one "has to"
come to them; arrivals and purchases are all "by choice". This is a discretionary market,
and time lags are involved in all sales, regardless of market cycle in play, because of
this non-local buyer profile.

As the Fall continues (even though it's still technically Summer, until Sept. 20th, the
change in calendar, right now, sends a signal of a new phase in the year), we will see the
pattern being laid down for the early Spring market to come.    

Will there be new inventory coming onstream, at a higher price point? Will there be new
inventory coming on, at all? Will most owners still prefer not to be sellers, unless they
"have to"? (Death, divorce, moving to assisted living are the main reasons for listing,
right now). Will buyers decide that the volatility in the financial markets means that it
might not be smart to remain in cash, and therefore they'll be looking for good
opportunities, in areas that offer protected investment? Or, will buyers decide to
continue to "think about it", and so sellers will decide to reduce prices, to attract
"action"? Did I hear you ask about Salt Spring Island & the Southern Gulf Islands as
"protected investment" areas?

No one has a crystal ball!

In change, lies opportunity.

Questions? "See Li for Successful Solutions!"

Li Read,
Managing Broker,
RE/MAX Salt Spring

1-800-731-7131
FAX: 250-537-4287
www.liread.com