Buying or selling a home is a big decision - you need an experienced professional to guide you through the process. When you work with me, you can count on personal, attentive, patient service, excellent knowledge of the area, great negotiation skills and expert selling strategies.
Over the past few years, a real estate buying frenzy bid up home prices to eye-popping amounts. However, as mortgage rates have risen, buyer demand has cooled.1 Consequently, home sellers who enter the market today may need to reset their expectations.
The reality is, it’s no longer enough to stick a “for sale” sign in the yard and wait for buyers to bang down the door. If you want to net the most money possible for your property in today’s market, you’ll need an effective game plan and a skilled team of professionals to implement it.
Fortunately, we’ve developed a listing strategy that combines our proven approach to preparation, pricing, and promotion—all designed to help you get top dollar for your home. But you will play an important role in the selling process, as well.
Here are some crucial steps you can take to set yourself up for success as a home seller in this market:
1. Make Strategic Repairs and Improvements
When you sell something, it’s important to consider what your customer wants to buy. And according to a recent survey, 83% of Canadians view “affording necessary renovations” as a major hurdle to buying a home.2 If you can present buyers with a move-in-ready option, they will feel more confident in making an offer.
Deciding whether to jump into the housing market or rent instead is rarely an easy decision – especially if you’re a first-time homebuyer. But in today’s whirlwind market, you may find it particularly challenging to pinpoint the best time to start exploring homeownership.
A real estate boom during the pandemic pushed home prices to an all-time high.1 Add higher mortgage rates to the mix, and some would-be buyers are wondering if they should wait to see if prices or rates come down.
But is renting a better alternative? Rents have also soared along with inflation – and are likely to continue climbing due to a persistent housing shortage.2 And while homebuyers can lock in a set mortgage payment, renters are at the mercy of these rising costs for the foreseeable future.
So, what's the better choice for you? There’s a lot to consider when it comes to buying versus renting. Luckily, you don’t have to do it alone. Reach out to schedule a free consultation and I'll help walk you through your options. You may also find it helpful to ask yourself the following questions:
1. How long do I plan to stay in the home?
You'll get the most financial benefit from a home purchase if you own the property for at least five years.3 If you plan to sell in a shorter period of time, a home purchase may not be the best choice for you.
There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures.
Even though housing markets can shift from one year to the next, you’ll typically find that a home’s value will ride out a market’s ups and downs and appreciate with time.4 The longer you own a property, the more you are likely to benefit from its appreciation.
Once you’ve found a community that you’d like to stay in for several years, then buying over renting can really pay off. You’ll not only benefit from appreciation, but you’ll also build equity as you pay down your mortgage – and you’ll have more security and stability overall.
Also important: If you plan to stay in the home for the life of the mortgage, there will come a time when you no longer have to make those payments. As a result, your housing costs will drop dramatically, while your equity (and net worth) continue to grow.
2. Is it a better value to buy or rent in my area?
If you know you plan to stay put for at least five years, you should consider whether buying or renting is the better bargain in your area.
One helpful tool for deciding is a neighborhood’s price-to-rent ratio: just divide the median home price by the median yearly rent price. The higher the price-to-rent ratio is, the more expensive it is to buy compared to rent.5 Keep in mind, though, that this equation provides only a snapshot of where the market stands today. As such, it may not accurately account for the full impact of rising home values and rent increases over the long term.
According to data from the Canadian Real Estate Association, a homeowner who purchased an average-priced Canadian home 10 years ago would have gained roughly $285,000 in equity — all while maintaining a steady mortgage payment.6,7
In contrast, someone who chose to rent during that same period would have not only missed out on those equity gains, but they would have also seen average Canadian rental prices increase by around 34%.8
So even if renting seems like a better bargain today, buying could be the better long-term financial play.
Ready to compare your options? Then reach out to schedule a free consultation. As a local market expert, I can help you interpret the numbers to determine if buying or renting is a better value in your particular neighborhood.
3. Can I afford to be a homeowner?
If you determine that buying a home is the better value, you’ll want to evaluate your financial readiness.
Start by examining how much you have in savings. After committing a down payment and closing costs, will you still have enough money left over for additional expenses and emergencies? If not, that’s a sign you may be better off waiting until you’ve built a larger rainy-day fund.
Then consider how your monthly budget will be impacted. Remember, your monthly mortgage payment won’t be your only expense going forward. You may also need to factor in property taxes, insurance, association fees, maintenance, and repairs.
Still, you could find that the monthly cost of homeownership is comparable to renting, especially if you make a sizable down payment. Landlords often pass the extra costs of homeowning onto tenants, so it’s not always the cheaper option.
Plus, even though you’ll be in charge of financing your home’s upkeep if you buy, you’ll also be the one who stands to benefit from the fruits of your investment. Every major upgrade, for example, not only makes your home a nicer place to live; it also helps boost your home's market value.
If you want to buy a home but aren’t sure you can afford it, give me a call to discuss your goals and budget. I can give you a realistic assessment of your options and help you determine if your homeowning dreams are within reach.
4. Can I qualify for a mortgage?
If you’re prepared to handle the costs of homeownership, you’ll next want to look into how likely you are to pass Canada's mortgage stress test and get approved for a mortgage.
Every borrower who applies for a mortgage from a federally-regulated lender, such as a bank, must pass a mortgage stress test – even if you have an ample down payment. (Some smaller lenders that aren't federally regulated, such as credit unions, may also put your mortgage application through a stress test, but they aren't required to do so.)9
To conduct the test, a lender will consider your qualifying income, estimated expenses (such as condo fees or non-mortgage-related debt), and prospective mortgage amount and calculate whether you'd still be able to afford the mortgage if your rate rose by a certain amount. You can also conduct your own mock stress test by inputting some income and expense estimates into the Government of Canada's Mortgage Qualifier Tool.10 However, be aware the government's minimum qualifying interest rate could change by the time you’re ready to buy.
Every lender will also have its own approval criteria separate from the feds' minimum. But, in general, you can expect a creditor to scrutinize your job stability, credit history, and savings to make sure you can handle a monthly mortgage payment.
For example, lenders like to see evidence that your income is stable and predictable. So if you’re self-employed, you may need to provide additional documentation proving that your earnings are dependable. A lender will also compare your monthly debt payments to your income to make sure you aren't at risk of becoming financially overextended.
In addition, a lender will check your credit report to verify that you have a history of on-time payments and can be trusted to pay your bills. Generally, the higher your credit score, the better your odds of securing a competitive rate.
Whatever your circumstances, it’s always a good idea to get preapproved for a mortgage before you start house hunting. Let me know if you’re interested, and I’ll give you a referral to a mortgage specialist or mortgage broker who can help.
Want to learn more about applying for a mortgage? Reach out to request a copy of my report: “8 Strategies to Secure a Lower Mortgage Rate”
5. How would owning a home change my life?
Before you begin the preapproval process, however, it’s important to consider how homeownership would affect your life, aside from the long-term financial gains.
In general, you should be prepared to invest more time and energy in owning a home than you do renting. There can be a fair amount of upkeep involved, especially if you buy a fixer-upper or overcommit yourself to a lot of DIY projects. If you’ve only lived in an apartment, for example, you could be surprised by the amount of time you spend maintaining a lawn.
On the other hand, you might relish the chance to tinker in your very own garden, make HGTV-inspired improvements, or play with your dog in a big backyard. Or, if you’re more social, you might enjoy hosting family gatherings or attending block parties with other committed homeowners.
The great thing about owning a home is that you can generally do what you want with it – even if that means painting your walls fiesta red one month and eggplant purple the next.
The choice – like the home – is all yours.
HAVE MORE QUESTIONS? I’VE GOT ANSWERS
The decision to buy or rent a home is among the most consequential you will make in your lifetime. I can make the process easier by helping you compare your options using real-time local market data. So don't hesitate to reach out for a personalized consultation, regardless of where you are in your deliberations. I'd be happy to answer your questions and identify actionable steps you can take now to reach your long-term goals.
The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.
Sources:
1. Canadian Real Estate Association (CREA) -
https://stats.crea.ca/en-CA/
2. Financial Post - https://financialpost.com/real-estate/nowhere-to-live-rents-in-canada-surge-as-home-prices-fall
3. Wealthsimple - https://www.wealthsimple.com/en-ca/magazine/buying-vs-renting-your-home
4.Trading Economics -
https://tradingeconomics.com/canada/housing-index
5.Investopedia -
https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
6.CBC -
https://www.cbc.ca/news/business/average-home-price-ticked-2-lower-in-july-1.1281984
7.Canadian Real Estate Association (CREA) -
https://stats.crea.ca/en-CA/
8.CMHC -
https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/TableMatchingCriteria?GeographyType=Country&GeographyId=1&CategoryLevel1=Primary%20Rental%20Market&CategoryLevel2=Average%20Rent%20%28%24%29&ColumnField=2&RowField=TIMESERIES#timeperiod
9.Government of Canada - https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preparing-mortgage.html
10.Financial Consumer Agency of Canada -
https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx
No matter what’s going on in the housing market, the process of selling a home can be challenging. Some sellers have a hard time saying goodbye to a treasured family residence. Others want to skip ahead to the fun of decorating and settling in a new place. Almost all sellers want to make the most money possible.
Whatever your circumstances, the road to the closing table can be riddled with obstacles — from issues with showings and negotiations to inspection surprises. But many of these complications are avoidable when you have a skilled and knowledgeable real estate agent by your side.
For example, here are seven common mistakes that many home sellers make. These can cause anxiety, cost you time, and shrink your financial proceeds. Fortunately, we can help you avert these missteps and set you up for a successful and low-stress selling experience instead.
MISTAKE # 1: Setting An Unrealistic Price
Many sellers believe that pricing their home high and waiting for the “right buyer” to come along will net them the most money. However, overpriced homes often sit on the market with little activity, which can be the kiss of death in real estate — and result in an inevitable price drop.1
Alternatively, if you price your home at (or sometimes slightly below) market value, your home can be among the nicest that buyers have seen within their budget. This can increase your likelihood of receiving multiple offers.2
To help you set a realistic price from the start, we will do a comparative market analysis, or CMA. This integral piece of research will help us determine an ideal listing price, based on the amount that similar properties have recently sold for in your area.
Without this data, you risk pricing your home too high (and getting no offers) or too low (and leaving money on the table). We can help you find that sweet spot that will draw in buyers without undercutting your profits.
MISTAKE #2: Trying To Time The Market
You’ve probably heard the old saying: “Buy low and sell high.” But when it comes to real estate, that’s easier said than done.
Delaying your home sale until prices are at their peak may sound like a great idea. But sellers should keep these factors in mind:
Predicting the market with certainty is nearly impossible.
If you wait to buy your next home, its price could increase, as well. This may erode any additional proceeds from your sale.
If mortgage rates are rising, your pool of potential buyers could shrink—and you will have to pay more to finance your next purchase.
Instead of trying to time the market, choose your ideal sales timeline, instead. This may be based on factors like your personal financial situation, shifting family dynamics, or the seasonal patterns in your particular neighbourhood. We can help you figure out the best time to sell given your individual circumstances.
MISTAKE #3: Failing To Address Needed Repairs
Many sellers hope that buyers won’t notice their leaky faucet or broken shutters during a home showing. But minor issues like these can leave buyers worrying about more serious — and costly — problems lurking out of sight.
Even if you do receive an offer, there’s a high likelihood that the buyer will hire a professional home inspector, who will flag any defects in their report. Neglecting to address a major issue could lead buyers to ask for costly repairs, money back, or worse yet, walk away from the purchase altogether.
To avoid these types of disruptions, it’s important to make necessary renovations before your home hits the market. We can help you decide which repairs and updates are worth your time and investment. In some cases, we may recommend a professional pre-listing inspection.
This extra time and attention can help you avoid potential surprises down the road and identify any major structural, system, or cosmetic faults that could impact a future sale.3
MISTAKE #4: Neglecting To Stage Your Home
Staging is the act of preparing your home for potential buyers. The goal is to “set the stage” for buyers to help them envision themselves living in your home. Some sellers opt to skip this step, but that mistake can cost them time and money in the long run. A 2021 survey by the Real Estate Staging Association found that, on average, staged homes sold nine days faster and for $40,000 over list price.4
Indoors, staging could include everything from redecorating, painting, or rearranging your furniture pieces to removing personal items, decluttering, and deep cleaning. Outdoors, you might focus on power washing, planting flowers, or hanging a wreath on the front door.
You may not need to do all of these tasks, but almost every home can benefit from some form of staging. Before your home hits the market, we can refer you to a professional stager or offer our insights and suggestions if you prefer the do-it-yourself route.
MISTAKE #5: Evaluating Offers On Price Alone
When reviewing offers, most sellers focus on one thing: the offer price. And while dollar value is certainly important, a high-priced offer is worthless if the deal never reaches the closing table. That’s why it’s important to consider other factors in addition to the offer price, such as:
-Financing and buyer qualifications
-Deposit size
-Contract contingencies
-Closing date
Depending on your particular circumstances, some of these factors may or may not be important to you. For example, if you’re still shopping for your next home, you might place a high premium on an offer that allows for a flexible closing date.
Buyers and their agents are focused on crafting a deal that works well for them. We can help you assess your needs and goals to select an offer that works best for you.
MISTAKE #6: Acting On Emotion Instead Of Reason
It’s only natural to grow emotionally attached to your home. That’s why so many sellers end up feeling hurt or offended at some point during the selling process. Low offers can feel like insults. Repair requests can feel like judgments. And whatever you do — don’t listen in on showings through your security monitoring system. Chances are, some buyers won’t like your decor choices, either!
However, it’s a huge mistake to ruin a great selling opportunity because you refuse to counter a low offer or negotiate minor repairs. Instead, try to keep a cool head and be willing to adjust reasonably to make the sale. We can help you weigh your decisions and provide rational advice with your best interests in mind.
MISTAKE #7: Not Hiring An Agent
There’s a good reason 90% of homeowners choose to sell with the help of a real estate agent. Homes listed by an agent sold for 22% more than the average for-sale-by-owner home, according to a recent US-based study.5
Selling a home on your own may seem like an easy way to save money. But in reality, there is a steep learning curve. And a listing agent can:
Skip past time-consuming problems
Use market knowledge to get the best price
Access contacts and networks to speed up the selling process
If you choose to work with a listing agent, you’ll save significant time and effort while minimizing your personal risk and liability. And the increased profits realized through a more effective marketing and negotiation strategy could more than make up for the cost of your agent’s commission.
We can navigate the ins and outs of the housing market for you and make your selling process as stress-free as possible. You may even end up with an offer for your home that’s better than you expected.
BYPASS THE PITFALLS WITH A KNOWLEDGEABLE GUIDE
Your home selling journey doesn’t have to be hard. When you hire us as your listing agent, we’ll develop a customized sales plan to help you get top dollar for your home without any undue risk, stress, or aggravation. If you’re thinking of buying or selling a home, reach out today to schedule a free consultation and home value assessment.
Sources:
1. Realtor.ca -
https://www.realtor.ca/blog/postpage/2666/1362/the-importance-of-having-a-realtor%C2%AE-price-your-home/
2. Royal Bank of Canada -
https://www.rbcroyalbank.com/mortgages/sellers-vs-buyers-market.html
3. Canadian Association of Home & Property Inspectors -
https://www.cahpi.ca/en/blog/3-reasons-you-should-hire-a-cahpi-inspector
4. Real Estate Staging Association -
https://www.realestatestagingassociation.com/content.aspx?page_id=22&club_id=304550&module_id=164548
5. National Association of Realtors -
https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics
We’re still in a seller’s market, but that doesn’t mean your home is guaranteed to easily sell.1 If you want to maximize your sale price, it’s still important to prepare your home before putting it on the market.
Start by connecting with your real estate agent as soon as possible. Having the eyes and ears of an insightful real estate professional on your side can help you boost your home’s appeal to buyers. What’s more, beginning the preparation process early allows you to tackle repairs and upgrades that can increase your property’s value.
Use the checklist below to figure out what other tasks you should complete in the months leading up to listing your home. While everyone’s situation is unique, these guidelines will help you make sure you’re ready to sell when the time is right. Of course, you can always call me if you’re not sure where to start or what to tackle first. We can help customize a plan that works for you.
AS SOON AS YOU THINK OF SELLING
Some home sellers want to plan their future move far in advance, while others will be required to pack up on very short notice. Whatever your circumstances, these first steps will help assure you’ll be ahead of the listing game.
Contact Your Real Estate Agent
We go the extra mile when it comes to servicing our clients, and that includes a series of complimentary, pre-listing consultations to help you prepare your home for the market.
Some sellers make the mistake of waiting until they are ready to list their home to contact a real estate agent. But we’ve found that the earlier we’re brought into the process, the better the result. That often means a faster sale—and more money in your pocket after closing.
We know what buyers want in today’s market, and we can help devise a plan to maximize your property’s appeal. We can also connect you with our trusted network of contractors, vendors, and service professionals, so you’ll be sure to get the VIP treatment. This network of support can alleviate stress and help ensure you get everything done in the weeks or months leading up to listing.
Address Major Issues and Upgrades
In most cases, you won’t need to make any major renovations before you list. But if you’re selling an older home, or if you have any doubt about its condition, it’s best to get us involved as soon as possible so we can help you assess any necessary repairs.
In some instances, we may recommend a pre-listing inspection. Although it's less common in a seller's market, a pre-listing inspection can help you avoid potential surprises down the road. We can discuss the pros and cons during our initial meeting.
This is the time to address major structural, systems, or cosmetic issues that could hurt the sale of your home down the line. For example, problems with the frame, foundation, or roof are likely to be flagged on an inspection report. Issues with the HVAC system, electrical wiring, or plumbing may cause the home to be unsafe. And sometimes outdated or unpopular design features can limit a home’s sales potential.
Remember, when you’re dealing with major repairs or renovations, it’s best to give yourself as much time as possible. Given rampant labor and material shortages, starting right away can help you avoid costly delays.2 Contact me so I can guide you on the updates that are worth your time and investment.
1 MONTH (OR MORE) BEFORE YOU LIST
Once any large-scale renovations have been addressed, you can turn your attention to the more minor updates that still play a major role in how buyers perceive your home.
Make Minor Repairs
Look for any unaddressed maintenance or repair issues, such as water spots, pest activity, and rotten siding. This is the time to take care of those small annoyances like squeaky hinges, sticking doors, and leaky faucets, too.
Many of these issues can be handled by going the DIY route and using a few simple tools. Tackle the ones you can and be sure to call a professional for the ones you’re not comfortable doing yourself. We can refer you to local service providers who can help.
Remember that it’s easy to overlook these small issues because you live with them. When you work with us, you get a fresh set of eyes on your home—so you don’t miss any important repairs that could make a big difference to buyers.
Refresh Your Design
This is a great time to think about some simple design updates that can make a significant impression on buyers. For example, a fresh coat of paint is an easy and affordable way to spruce up your home. A recent survey of Canadian agents found that paint and landscaping were two upgrades that offered the highest return on investment.3
HGTV landscape designer Carson Arthur agrees. According to Arthur, landscaping is the best place to invest your money and has the potential to increase your home’s value by up to 7%.4 If weather permits, lay fresh sod where needed, plant colorful flowers, and add some new mulch to your beds.
Even just repositioning your furniture can make a huge difference to buyers. A survey published by the International Association of Staging Professionals found that staged homes often sell faster and for more than their list price.5 We can refer you to a local stager or offer our insights and suggestions if you prefer the DIY route.
Declutter and Depersonalize
Doing a little bit of decluttering every day is a lot easier than trying to take care of it all at once right before your home hits the market. A simple strategy is to do this one room at a time, working your way through each space whenever you have a bit of free time.
Start by donating or discarding items that you no longer want or need. Then pack up any seasonal items, family photos, and personal collections you can live without for the next few weeks. Bonus: This will give you a head start on packing for your move!
1 WEEK BEFORE YOU GO TO MARKET
With just one week before your home is available for sale, all major items should be crossed off your to-do list. Now it’s time to focus on the small details that will really make your home shine. Here are a few key areas to focus on during this last week.
Check-In With Your Agent
We’ll connect again to make sure we’re aligned on the listing price, marketing plan, and any remaining prep. We will be there every step of the way, ensuring you’re fully prepared to maximize the sale of your home.
Tidy Your Exterior
You’ve already done the major landscaping—now it’s time to tackle the last few details. Make sure your lawn is freshly mowed, hedges are trimmed, and flower beds are weeded.
In addition, now is the time to clean your home’s exterior if you haven’t already. Power wash your siding, empty the gutters, and wash all your windows and screens.
Deep Clean Your Interior
Your house should be deep cleaned before listing, including a thorough deodorizing of the home’s interior and steam cleaning for all carpets. Consider hiring a professional cleaning company to ensure the space smells and looks as fresh as possible.
In addition to cleaning, take some time to tidy up. Buyers will look inside your closets, pantries, and cabinets, so make sure they are neat and organized. Small appliances and toiletries should be cleared off the countertops.
DAY OF SHOWING
Now you’re all set to go and there are just a few small things you need to handle on the day of showings or open houses. Do a final walk-through and take care of these finishing touches to give potential buyers the best possible impression.
Pre-Showing Prep
Happy and comfortable buyers are more likely to submit offers! Make them feel at home by adjusting the thermostat to a comfortable temperature. Open any blinds and curtains throughout the house and turn on all lights so buyers can see all the potential in your home.
Then tidy up by vacuuming and sweeping floors, emptying (or hiding) trash cans, and wiping down countertops. In the bathrooms, close toilet lids and hang clean hand towels.
Don’t forget to secure jewelry, sensitive documents, prescription medications, and any other items of value in a safe or store them off-site.
Finally, it’s best to have pets out of the house during showings. If possible, you should also remove evidence of pets (litter box, dog beds, etc.), which can be a turn-off for some buyers.
DON’T WAIT TO PREP YOUR HOME FOR SELLING
If you want to get top dollar for your home, don’t put it on the market before it’s ready. The right preparation can make all the difference when it comes to maximizing the offers you get. The upgrades and changes you need to make will depend upon your home’s condition, so don’t wait to speak with an agent.
Call our team if you’re thinking about selling your home, even if you’re not sure when. It’s never too early to seek the guidance of your real estate agent and start preparing your home to sell.
Sources:
1. RBC -
https://thoughtleadership.rbc.com/a-turning-point-more-sellers-enter-canadas-housing-market
2. ConstructConnect https://canada.constructconnect.com/canadata/forecaster/economic/2021/07/labour-shortages-high-material-costs-strong-demand-more-pressure-on-house-prices
3. RE/MAX -
https://blog.remax.ca/canadian-real-estate-renovation-trends/
4. National Post -
https://nationalpost.com/life/homes/curb-appeal-in-the-business-of-home-ownership-a-little-landscaping-can-go-a-long-way
5. International Association of Staging Professionals -
https://d3oaxt0bwkjnjn.cloudfront.net/documents/home-staging-industry-statistics-2020-min.pdf
Canada’s housing market hit a boiling point last year as homebuyers clambered for real estate in regions with significantly more demand than supply. But now that homeowners and buyers alike are feeling the pinch of rising interest rates and record inflation, the market appears to finally be simmering down.
That, in turn, could create a welcome opening for shoppers to be more selective with their searches. However, buyers hoping for a major downturn in prices may be left disappointed. Although home values in some segments are beginning to sag under the weight of higher borrowing costs, a persistent housing shortage is expected to keep prices high.
Read on for a closer look at some of the top factors impacting Canada’s real estate market and how they could affect you.
RISING MORTGAGE RATES ARE COOLING AN OVERHEATED MARKET
Over the past couple of years, homebuyers have faced record-high price appreciation and intense competition—in part due to historically low mortgage rates that were a result of the Bank of Canada’s efforts to keep the economy afloat during the COVID-19 pandemic.1
According to the Canadian Real Estate Association (CREA), in 2021, both the number of sales and average home price hit at an all-time high, with demand for new homes far exceeding supply.2 This trend continued through early 2022, despite widespread predictions that the Bank of Canada was gearing up to increase interest rates.3
But now that the central bank has officially begun pushing its key interest rate back up from emergency levels, the housing market is responding, with the pace of home sales cooling in March and April.4 The Canada Mortgage and Housing Corporation (CMHC) predicts that the housing market will continue to moderate in the coming year.5
The feds plan to keep raising interest rates as necessary to fight inflation, which means target rates could rise by another 1 to 2% or more over the next year.6 That, in turn, will cause both fixed and variable mortgage rates to rise.
As Senior Deputy Governor Carolyn Rogers noted in May: “We need higher rates to moderate demand, including demand in the housing market. Housing price growth is unsustainably strong in Canada.”7
What does it mean for you?
If you’re shopping for a new home, expect mortgage rates to keep rising into 2024.8 So, you’ll need to act fast if you want to get in at a lower rate. However, the cooling effect should make for a less competitive market. I can help you chart the best path.
If you’ve been thinking about selling, higher mortgage rates may shrink your pool of potential buyers, so don’t wait too long to list. And if you are up for a renewal, you should also act quickly or risk paying a higher rate. Contact me to discuss your options.
DEMAND AND PRICES ARE STARTING TO SOFTEN IN SOME SEGMENTS
Nationally, home prices soared a record 26.6% last year, an unsustainable rate of appreciation by any measure.9 But now that the Bank of Canada has put rock-bottom rates in the rear view window, sales have begun to slow.
Soon after the Bank of Canada began raising interest rates in early March, the real estate market responded. According to the CREA, in March, home sales fell by 5.4% on a month-over-month basis and the Aggregate Composite MLS® Home Price Index (HPI) ticked up just 1%, “a marked slowdown from the record 3.5% increase in February.”10
By April, home sales dropped by another 12.6% over the previous month as homeowners and buyers continued adjusting to higher rates.. “Following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue,” said CREA Chair Jill Oudil. Meanwhile, prices are still rising in some markets, but are sagging in others, causing the HPI to dip in April for the first time since 2020.11
As the Bank of Canada continues pushing up rates, more buyers may give up on their homeownership dreams if they feel too squeezed by the combination of high rates and high prices. Still, many experts say a major downturn in prices is unlikely. That’s in part due to the fact that there still aren’t enough homes available to meet the demands of a growing population, says CREA CEO Michael Bourque. “The supply of new homes is not even close to keeping up with demographic changes and population growth.”12 As long as housing remains a scarce asset, prices will remain relatively elevated.
What does it mean for you?
If you’ve been waiting to buy a home, now may be the perfect time to jump in the market. There are deals to be found if you know where to look. But don’t wait too long, or higher mortgage rates will erode any cost savings. I can help you find the best opportunities in today’s market.
For homeowners, the outlook is still bright. Governmental interventions are being put in place to stabilize the market–not crash it. And demand for housing and a strong job market should help protect your investment.
INVENTORY REMAINS TIGHT
According to the CMHC, housing starts trended higher in April after a small downturn in March. Overall, new homes are still being built at a faster clip today than in the past, but at a slower pace than we saw in 2021, noted CMHC Chief Economist Bob Dugan.13 Homebuilders are facing a wide range of challenges, including persistent inflation, rising rates, and ongoing labour shortages.
Increased federal investment could help counteract at least some of those challenges. The federal government recently announced plans to help double the pace of housing construction over the next decade by funding significantly more new and affordable housing. It also announced additional relief measures, including a temporary ban on foreign investment, doubling first-time buyers’ tax credit, and halting blind bidding wars.14
In addition to fewer homes being built, new listings are also down, according to the CREA’s sales report. But a decrease in demand is offsetting the impact in some areas. “A little more than half of local markets were balanced markets…a little less than half were in seller’s market territory.”11
What does it mean for you?
While supply remains at historically low levels, even a modest bump in inventory can help take pressure off of buyers. If you’ve had trouble finding a home in the past, give me a call to discuss what I’m currently seeing in your target neighbourhood and price range.
If you’re a homeowner, it’s still a great time to sell and cash out those big equity gains. Contact me to find out how much your home is worth in today’s market.
I’M HERE TO GUIDE YOU
While national real estate trends can provide a “big picture” outlook, real estate is local. And as local market experts, I can guide you through the ins and outs of our market and the local issues that are likely to drive home values in your particular neighbourhood.
If you’re considering buying or selling a home, contact me now to schedule a free consultation. I can help you assess your options and make the most of this unique real estate landscape.
Sources:
1. Bank of Canada -https://www.bankofcanada.ca/2020/03/press-release-2020-03-27/
2. Global News -https://globalnews.ca/news/8516543/canada-home-sales-record-crea/
3. CBC -https://www.cbc.ca/news/business/crea-housing-february-1.6385274
4. Canadian Real Estate Association -https://www.crea.ca/housing-market-stats/stats/
5. Canada Mortgage and Housing Corporation – https://www.cmhc-schl.gc.ca/en/media-newsroom/news-releases/2022/housing-markets-moderate-historic-2021-levels
6. Bank of Canada -https://www.bankofcanada.ca/press/press-releases/
7. Reuters – https://www.reuters.com/world/americas/bank-canada-says-strong-demand-risks-higher-inflation-2022-05-03/
8. Better Dwelling – https://betterdwelling.com/canadian-mortgage-rates-to-surge-demand-will-be-slowest-in-recent-history-moodys/
9. CBC -https://www.cbc.ca/news/business/crea-housing-december-1.6317503#
10. Canadian Real Estate Association – https://www.crea.ca/news/march-home-sales-and-new-listings-ease-back-following-surge-in-february/
11. Canadian Real Estate Association – https://www.crea.ca/news/home-sales-drop-in-april-as-mortgage-rates-shoot-higher/
12. Global News -https://globalnews.ca/news/8716412/canada-housing-market-cooling-bubble-interest-rate/
13. Canada Mortgage and Housing Corporation – https://www.cmhc-schl.gc.ca/en/media-newsroom/news-releases/2022/canadian-housing-starts-trend-higher-april
14. Office of the Prime Minister of Canada, Justin Trudeau – https://pm.gc.ca/en/news/news-releases/2022/04/13/helping-young-people-get-housing-market
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