For the longest time it was the term ‘red hot’ that was applied to the Canadian real estate market, and a big part of that resulting from the fact demand far outstripped supply and so buyers were willing to paly the obscenely high costs attached to many of the homes being sold in desirable locations in Canada. Much has been made of how bidding wars were driving up the final sale prices to be WAY above asking prices for the homes, and while that’s great for the homeowners it’s not in the interest of the collective good as it prevents many would-be homeowners from getting into the market with homes that are good fits for their families.
The consensus in the industry is that now – in the middle of the summer of 2021 – the market is still fairly hot, but that it’s cooled down some. Some will suggest it’s a temporary pause, while others think that there is something of a more permanent correction coming. Like any major trend, this affects people working in real estate and for some the decrease in activity will factor into their business more than it will for others. That’s why our online real estate lead generation system here at Real Estate Leads is so beneficial for realtors who want to ensure they continue to drum up new clients consistently.
But back to our topic for this week. One of the things that all these bidding wars do is create buyer fatigue, and that shouldn’t come as a surprise if you can imagine what being constantly outbid will do to a prospective homebuyer’s psyche. Whether that’s leading more and more of them to drop out of the game remains to be seen, but it’s certainly a believable theory.
Huge Detached Home Demand
One thing that’s well established is that families will prefer to raise their children in a home with a backyard, and not in multi-family housing as is usually the case for people in major metro areas. The pandemic has amplified that too, and to give you an example of this possible buyer fatigue a realtor selling a detached home in Burnaby BC for a clients received 42 offers above asking price on the home.
That’s 41 buyers who were willing to pay more than the listed price going away disappointed, and this is increasingly the norm in the Greater Vancouver and Greater Toronto areas. This house in particular sold for $216,000 over asking price at 1.715 million.
It’s not difficult to imagine that some of these buyers will become disillusioned to the point that they’re choosing to sit on the sidelines for a while and let this frenzy pass. If so, that could and would cool sales although you could also believe that given population inflows into these areas that there would be other willing buyers to replace those who are taking a ‘time out’.
The increase in buyers that will come with opening to immigration and international students will be a factor too, and some buyers may be even less enthusiastic knowing that median prices are likely going to rise again once this happens. There is a report that states real estate markets across Canada are moderating nationally, but what is the cause of this?
Fewer bidders willing to engage in bidding wars may have homeowners keeping properties off the market knowing that the frenzy that would otherwise accompany the sale of the home isn’t going to be to the same extent. Another factor is that easing restrictions related to COVID will cause attention to wane from real estate over the next few months, and the thinking of wanting more ‘space’ won’t be as pronounced as it was at this time last year.
The desire to buy a home could start subsiding as pandemic measures are lifted and many workers return to offices, and while that is likely true it’s also accurate that the country’s housing market remains near record-high sales levels. And the signs of moderation that have begun to appear over the past few months are really very small indicators to this point.
Statistics Canada noted a 0.7 percent drop in new home listings in June 2021.
What’s not small is the percentage of the decline. Stats Can has stated that sales activity was down 92% in all local markets for June 2021 on a month-over-month basis and that is a marked contrast from both previous months and this time last year, when real estate was as hot a commodity as you could ever imagine.
Along with this national home sales decline by 8.4% on a month-over-month basis for June, and that’s the 3rd straight month with a decline. The average price of a home in Canada rose 0.9% however during that same time, but that’s not as relevant to the discussion of volume of sales
The association also reported that the typical price of a home in Canada rose 0.9 percent month-over-month in June 2021, “continuing the trend of decelerating month-over-month growth that began in March”.
British Columbia is an ideal example of this, with the B.C. Real Estate Association reporting sales and prices across the province dropped for the third month in a row in June after the market peaked in March 2021.
However, there is good news in the fact that despite the month-over-month deceleration in new house price increases, year-over-year gains remained near record highs for June and that is predicted to continue for the duration of the year
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