A Real Estate Rollercoaster: Riding the Market Waves

2023 has been a volatile year for real estate and the trends we have seen from January until now have been consistently inconsistent. We have been on a roller coaster ride all year trying to decipher what’s going to happen next. While we can predict some trends, we have been at the mercy of the government’s inflation and rate change decisions.

Both have been huge factors in what the real estate market will do and we have seen pauses in activity leading into each announcement. The after-effects have taken weeks to trickle through the market whether it be positive or negative. With every Bank of Canada rate hike, we have seen caution from buyers on getting into the market or even the inability to do so.

We had become accustomed to historically low rates which allowed many, who shouldn’t have been able to qualify for a mortgage, to then get into the market. During that time competition was rampant. The average home price rose dramatically during that period and nearly doubled in a 5-year span (typical housing cycles see home prices double every 11-13 years).

We are now seeing the negative effects that have been brought to the market as inflated home prices and rising interest rates have become a burden for some homeowners to maintain, as well as for entry-level buyers to get into the market. In many cases, people who are coming up for renewal are unable to afford the new payments and/or are no longer qualifying for a mortgage for the amount they have already been covering for years.

The homeowners with locked-in rates, are riding them out until they mature because they don’t want to break their rate and lose their significantly lower payments. This has caused many homeowners to not want to move as it would be unaffordable for them.

The average number of listings on the market (inventory) continues to climb with every coming month as more and more people come up for renewals and as some try to cash out on their nest eggs to help offset rising expenses in other aspects of life.

No longer is your home going to go into competition and fly off the shelf. Home buyers now have choices, and are taking their time to evaluate every new listing that comes onto the market instead of just jumping on what’s available. You want to ensure that when they see your home it stands out from an increasingly growing number of homes hitting the market.

This has led us to what is now a “buyer’s market”, giving buyers a choice in homes. This is a stark contrast to a couple of years ago when a buyer would have to throw every penny they had into a home with a limited choice on features because there were so few on the market.

We see the market continuing to be a buyer’s market into the middle of next year. While the government is taking a “wait-and-see” approach on further hikes, it is unlikely that they will start easing the rate until at least the Summer of next year. They are looking for consistent numbers over a few cycles before they do so, and we have not reached the point in the economy yet where there is consistency in anything.

ADVICE FOR BUYERS

For those looking to buy, if you can qualify now and find something you love, it’s a great time to buy because home prices have softened. Maybe think about shorter terms on your mortgage to take advantage of lower rates if they start going down next year.

ADVICE FOR SELLERS

For sellers, you need to address the little things in your home to make it as inviting to potential home buyers as possible. Home buyers are less interested in renovating after they purchase because of the high cost of borrowing for the renovations.

By James Mink Real Estate Broker Coldwell Banker Community Professionals, Brokerage @theminkgroup