The Real Estate Market - May Driving Change
Monday May 16th, 2022
After a turbulent time in both real estate and the world at large, it seems we are now entering yet another new phase of the market. Though the world is slowly returning to a new normal, those active in real estate are wondering – what exactly does the “new normal” look like after experiencing the volatile market conditions of the last two years?
In the Town of Erin, realtors are trying to anticipate what the future will hold while others wonder if now is the time to buy or sell. Predicting the future is an understandably futile exercise. However, by analyzing historic market trends, emerging economic and pending legislative changes, with a bit of sleuthing it may be possible to make a more informed forecast. The month of April proved strong, and although the real estate gains were substantial for this time last year, the actual increase month to month has fallen since January.
So why the change now?
After a robust housing market in 2021, Buyers are wary of submitting offers under a Seller’s strategy of holding to a specific presentation date and time. Initially, this approach was to ensure buyers had the opportunity to view a home and provide time to prepare an offer. This strategy was entirely to the benefit of Sellers often producing bidding wars and multiple offers, at the expense of buyer conditions and driving elevated offer prices. Now, Buyers are seeing properties stay on the market longer with prices decreasing, making for a more relaxed house shopping experience overall. Buyers now have the luxury of time to see what happens before jumping back into the market.
Strategy of Holding Offers
Besides Buyer fatigue after months of dealing with the stress of sweating through blind bidding wars, many feel that Sellers were taking an unfair advantage. Rationally, Buyers want to spend as little as possible and Sellers want to achieve the highest price. But the compressed market had treated these buyers unfairly by essentially removing any due diligence conditions. With the slowing market, we see a return of Buyers’ conditions, including home inspections and financing, typically standard terms in offers to purchase properties.
Pending Interest Rate Hikes
No one can deny the effects of inflation eroding spending power. Anyone shopping for groceries can confirm rising prices on everyday items. Many financial analysts agree that the Bank of Canada must increase interest rates to keep inflation under control. The recent rate increase will likely not be the last and more hikes are predicted throughout the year. Although the Federal Government’s “stress test”, implemented in 2018, ensured a financial buffer for mortgagees, those entering the real estate market may be forced to change their budgets to adjust to lower mortgage approval amounts. If you were approved for a home in the $1,200,000 range in 2021, an interest rate hike may now have you looking in the $1,100,000 range, further tightening the available housing stock.
We all must live with rising fuel costs. Add to this the uncertainty of being called back into the office after working from home, which introduces yet another layer to consider when buying a home. The migration of families choosing to leave the City for more affordable options in the surrounding towns and villages often results. The cost of homeownership runs even higher with the addition of having to travel, typically by car, to work.
COVID And The Unsettling War In Ukraine
How one man can have so much power to force harm upon others is horribly disturbing. Combined with the uncertainty of a purported sixth wave of COVID the world may sometimes feel surreal and there is a collective need for respite. Home shopping has taken on an even greater level of risk when considering the world around us.
Whatever the case, the real estate market channels a path for change. Ensure that you benefit from these changes by calling Denise today to help you navigate a path that best meets the needs of you and your family.
Denise Dilbey, Broker
Royal LePage Meadowtowne Realty, Brokerage Independently owned and operated.