We have discussed the ongoing trend of price declines in the Canadian real estate market at length here, and there’s likely no need to go on about them any further. There are all sorts of factors that have gone into this, but the overarching and ultimately connected one is that all the ones that fuelled the overheated real estate market over the past decade and longer are now gone for the most part. Demand is the exception to that, and ongoing and growing demand is THE reason why median home prices in Canada haven’t gone lower than they have so far.
Nonetheless, prices are down and that has put something of a chill on the industry and there’s also no debating the fact that there is inventory that is not on the market that would be if prices were where they were at this time in 2021. The more of a buyer’s market that is created when prices go down is tempered a bit by this fact; fewer homes being on the market tends to protect the averages they end up selling for.
All of this leads to our discussion for this week’s blog entry here, and specifically with the way that some industry experts believe that real estate price declines may still benefit home sellers. Whether that is new that’s encouraging enough to persuade anyone to put a home on the market when they’ve been hesitant to do so remains to be seen, but one thing we do know is that our online real estate lead generation system here at Real Estate Leads is an excellent resource for an realtor who finds that new clientele are more scarce nowadays.
Let’s look at why some real estate insiders have this belief, and what’s backing it up for them.
The Canadian real estate market is going through an adjustment period right now and Canadian housing markets from coast to coast are returning to equilibrium. This is attributable to the Bank of Canada (BoC) raising interest rates and lifting mortgage rates along with them accordingly. The uncertainty in the housing market and the broader economy adds to this, and then there’s the fact that many households have exhausted their pandemic-era savings while inflation has eaten away at their purchasing power in a significant way.
According to the REMAX Canadian Housing Market Outlook for 2023 around 55% of housing markets in Canada will return to balance or even become a buyer’s market this year. This should mean a 3.3% slide in the average home price for 2023, and so far at the quarter mark that looks like a fairly accurate prediction. Of course that is going to benefit buyers, but could it benefit sellers too? It seems that it may.
A balanced market is when the supply of residential properties meets the level of demand. A buyer’s market is when there is a greater inventory of homes than the number of buyers. This type of climate means that buyers have more leverage and may be able to negotiate prices and homes may sit unsold longer than expected along with possible need to lower prices from the initial asking one.
So what part of ANY of that would be good for sellers?
Location, Subsequent Purchase Factors, and More
For starters, location can play a big role. The number may be be higher or lower depending on where you are located. Someone selling a single-family home or townhouse in Calgary or a similar market is going to like the sound of a sale price that is expected to rise 7% over the course of 2023. If you are listing your home for sale in the Ottawa real estate market you may benefit from an expected 4% rise. Plus the national outlook of -3.3% is lower than what was seen for 2022, meaning that the downturn or correction may have already peaked.
Another consideration is that clients who are selling a home will also need another place to reside in once the transaction is completed. By taking the equity and purchasing another residence, they will be avoiding the frenzy and panic of a seller’s market. Sellers can also see the way a near-balanced market means you they don’t need to give away their home for anything along the lines of 20% discount or whatever similar number anyone will suggest as reasonable given the housing market downturn.
Keep in mind there is still demand for housing and with interest rates increases being paused by the BoC as officially stated, home buying is expected to pick up again. Add the immigration factor and the competition for real estate in Canada will be buoyed yet again.
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