Part Two: What's going on, where are we, why is this happening & how do we navigate this?
Are we in a Sellers’ or a Buyers’ market?
We are still in a Sellers’ market because there isn’t enough inventory available for sale. Buyers who have taken the ‘we’ll be patient’ and see how low prices go, haven’t seen the options that they thought they would as there hasn’t been a notable influx of listings. Inventory is still at near historic lows. If Sellers have nothing to buy, they’re not going to list. So, with both parties holding back, we’re at a standstill.
People always need a place to live and most of us purchase homes with the plan to live in them for at least 5+ years. Anyone who bought 5 years ago has seen their investment increase exponentially and this has been proven over and over again for the last 20 years. Today’s prices may be lower than 7 months ago, but they are still higher than 2021 and… actually, in some areas they are increasing slightly. Overall, prices have been dropping 2.7% per month since March. From last year through this year, sales are down (detached, semi detached, town houses, condos) 40%. However, 1,165 properties in the $2 million plus range sold last month. Yet, there were only 300 sales in prices below $2 million. Sellers and Buyers in the $2 million plus range seem to be less affected by the interest rate/mortgage rate increases as their purchasing power is made up of different components. But still the supply, in every price range is very low - only a 2 months supply.
Most Sellers aren’t desperate to sell, right now. They’re looking to see if they can match the market and if they can’t, they’re holding off – hoping prices will rise in time. Buyers are waiting to see what will happen with prices since interest rates have limited what they can afford each month. And on October 26, we will definitely see another interest rate hike... Our country's inflation rate is still way too high.
How long will this last?
Neither Economists, reporters, fund managers, your neighbours, and not even I, have a crystal ball. The most important reality is that the real estate market always has been and always will be incredibly resilient. Think back to 2017, when we all thought it was the absolute pinnacle of housing prices. If you bought 5 years ago, the value of your home has exceeded your expectations, right? And over the years, we’ve also faced other challenges like the doubling of the land transfer tax, the HST on new home sales, the mortgage stress test, and the non-resident speculation tax. But our market has always responded with a positive vengeance, recovered and thrived!
What are we waiting for?
We need to have realistic expectations. Once Canada’s inflation rate is in line, interest rates will stabilize. Actually, we may look back at this current market and see it as just another blip. No one can predict what’s going to happen, but one thing I can say is that over the past three decades, there have been numerable times where buyers and sellers have sat on the sidelines. And each time, our market has bounced back.
Final thoughts…
The market has not crashed. Some properties are still being listed and sold. Yes, inventory and sales are down and so are prices but we're still at a higher price point than 2021. Even, multiple offers are making a slight comeback in high demand catchment neighbourhoods. As well, we’re seeing some modest (approximately 1%) price increases in the high end luxury market.
In, the not too distant future, without fail, we’ll see that more Sellers and Buyers will re-enter the market, followed by a 2nd wave, then a 3rd and then in droves. We need to be patient. It’s just a matter of time and we’ll be back. We always have been and we always will be.
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