The movements of the sun and moon have a celestial permanence to them and they will rise and set every day. But it’s only the movement of the moon that determines the movement of ocean tides. The tide will either be flooding or ebbing, and people use that same analogy to describe economic market trends. When a market is growing and strengthening then you’re in a flood, and when it’s declining and weakening then the tide is starting to ebb. The fact that economic trends affect the real estate market needs no explanation, and we’ll talk about that here. Along with what makes us the best real estate lead provider in Canada.
The vibrancy and strength of the national economy – and provincial / local economies to a lesser extent – are directly tied into how much income people are earning for themselves. And how much of that income can exist beyond their cost of living. Whatever is left over after those costs can be directed towards expenditure, and even though housing is a necessity it’s still an expenditure. It may be an expenditure that’s in an entirely different stratosphere with regards to how much people spend on their homes, and the inherent magnitude that real estate purchases have for people’s lives also doesn’t need to be explained.
As a real estate agent you’re going to find that you have more qualified buyers as clients when the economy is doing well, and greater numbers of homeowners are going to be more inclined to list their homes when median home values are up because of a stronger economy equalling more demand. There’s everything to like about that, but the tide is always going to ebb too. And when it does you’re going to have fewer qualified homebuyers and fewer homebuyers who feel now is the time to sell their home. This is going to play a role in the way realtors approach real estate lead generation in Canada, and it goes further than just to say those leads are harder to dig up when the economy is like an ebbing tide.
So with this week’s blog entry what we’ll look at is the impact of economic trends on the real estate market, and then take it in the direction of what real estate agents can do to best reorient their lead generation efforts when the market is trending down. Getting paid real estate leads is always advisable for agents at any time and independent of what the market is like. That’s because these are leads for people who have shown they are ready to buy or sell a home in the near future, and they’ve moves past the point of deciding on whether or not to buy / sell based on the market.
Turn today’s market shifts into new clients – get exclusive Canadian real estate leads now.
4 Key Factors
Real estate makes up a major share of personal wealth in any 1st-world country, and so that applies for Canada too. And it’s natural that homeownership continues to be a cornerstone of financial stability and long-term wealth building. The size and resilience of the real estate market make it an attractive and potentially profitable area for investors, and it’s important to keep in mind that people buying homes aren’t only doing so with the intention of living in it. Something to also consider as you evaluate the best real estate lead provider Canada.
All of this starts with understanding the impact of demographics on real estate, the data that reflect the composition of a population – age, race, gender, income, migration patterns, and population growth. Major shifts in the demographics of a nation can have a large impact on real estate trends for many years following the peak of these trends. These statistics are an often overlooked but significant factor that can affect how real estate is priced and the types of properties in demand.
Let’s look at how baby boomers born from 1945 through 1964 represent a demographic trend that could significantly influence the real estate market. Having these baby boomers starting to retire in the late part of the 2000s is a good example of this, and is bound to be felt by the market for years to come. Homeowners can start asking what would happen to the demand for second homes in popular vacation areas as more people start to retire? How would smaller incomes and family sizes affect the demand for larger homes as they become empty-nesters (as the expression goes)?
Interest rates are always going to be a powerful contributing factor in this too. Interest rates also have a major impact on the real estate market, and clients considering buying a home with a mortgage will likely be using a mortgage calculator to see how different rates of interest can affect purchase prices. Changes in interest rates can greatly influence a person’s ability to purchase a residential property.
The lower the interest rate, the lower the cost of a mortgage. Borrowers are going to love that, and it can also create greater demand for real estate. Prices get pushed up when this happens, and in these instances agents will do well to be more assertive when speaking to potential home seller clients.
Countering to that to some extent will be the way that as interest rates rise the cost of a mortgage increases, and real estate prices go down along with lowered demand. This is something that will be more pronounced in certain areas of the country than others. Perennially hot markets like Vancouver and Toronto aren’t going to be as affected by these market swings, and that’s simply because so many people want to live in these areas at all times.
It’s also true that when interest rates decline, the price of a bond goes up because its coupon rate becomes more desirable. When interest rates increase, the price of bonds decreases. And then when interest rates decrease, REITs’ high yields become more attractive and their prices go up. When interest rates increase, the yield on a REIT becomes less attractive and that pushes its price down.
This can be something that you can be very upfront with when working investor clients, and they’ll like to see that you’re in-the-know about this stuff if they’re deciding whether or not they’re going to work with you as their agent. Expanding your knowledge base on these types of subjects can really help with real estate lead generation Canada.
Economic Health Influencing Real Estate Values
The overall health of the economy will affect the value of real estate. This is generally measured by economic indicators such as the GDP, employment data, manufacturing activity, the prices of goods, etc. And if an economy is sluggish, the real estate market is going to be negatively affected by that in the same way. In the bigger picture the cyclicality of the economy can have varying effects on different types of real estate.
An example can be that is a REIT has a larger percentage of hotels as investments, it would typically be more affected by an economic downturn than a REIT that had invested in office buildings. Hotels are a form of property that tend to be especially sensitive to economic activity due to the type of lease structure inherent in the business. Renting a hotel room can be thought of as a form of short-term lease that can be easily avoided by hotel customers should the economy do poorly. While office tenants generally have longer-term leases that can’t be changed in the middle of an economic downturn.
The way government policies push or pull on the real estate market is something else that needs to be looked at here too. Legislation is another factor that can have a sizeable impact on property demand and prices. Federal and Provincial governments offer tax credits, deductions, and subsidies as ways to temporarily boost demand for real estate. So it’s also good for you to be aware of current government incentives and better able to determine changes in supply and demand, and then being able to share this expertise with clients who are thinking about working with you as their real estate agent.
Market Factors Affecting House Prices
Median home prices at any time and in any city or town in Canada be affected by comparable home values, the age, size, and conditions of properties that are selling, neighbourhood appeal, along with the health of the overall housing market. A weakening economy or recession is always going to be a legit threat, based on the potential for people to lose their jobs and for household incomes to drop. People need to be in good financial stead if they’re going to consider buying a home, and while that doesn’t factor into the decision for home sellers the same way it still can freeze an owner’s enthusiasm.
Especially if they’re thinking of selling with the idea of upgrading to a better home and taking on a larger mortgage as part of that. If that is happening with inflation occurring at the same time you are going to need to speak with these types of potential clients differently. As this relates to homebuyer clients looking at buying homes through pre sales, you need to understand that inflation causes property prices to increase.
This is primarily because construction costs rise with inflation, and that means fewer developers can afford to build new units. This limits supply, and limited supply puts upwards pressure on values.
Homeowners will be pleased with that aspect of it, and it’s at these times that you can be more aggressive when trying to gain them as clients. Indeed, you need to be pushy to some extent with real estate lead generation in Canada at all times, but if you can see that the value of a homeowner’s property is likely never going to be higher than it is right now then you can and should be very emphatic in making them aware of that. Especially if they’re on the fence about whether or not is the best time to sell for maximum return on their home.
The real estate market is always going to be shaped by four key factors: demographics, interest rates, the economic cycle, and government policies. It’s a good idea for real estate agents to have as solid an understanding as possible about how these elements can come together to varying extents and then help clients assess these market trends and make decisions around buying or selling homes accordingly.
Sign up for real estate leads here and you’ll begin to receive a monthly quota of qualified, online-generated buyer and / or seller leads. These will be contact information for people who have indicated that they are nearing the point where they’re ready to buy or sell a home in the city or town in Canada where you are working as a real estate agent. You will have the opportunity to be the first agent to contact these folks, and convince them that you are as good a choice an any for their realtor.
This is a dynamite way to supercharge your real estate lead generation in Canada results and it’s comes highly recommended from many other profit-minded realtors just like you. Turn today’s market shifts into new clients – get exclusive Canadian real estate leads now!
