When you talk to most people these days, the prevailing attitude is that our real estate market has shifted from greed to fear. Sellers and developers are fearful that they have missed out on the top of the market. No matter what way you look at it, there is risk involved. If you take your property off the market or refuse to budge on price, you may kick yourself a few months down the road when more homes come on the market to compete with yours. However, there’s always the hope that the market will suddenly turn into last years and you’ll have a chance to realize an amazing sale price. A crystal ball during these times would be helpful, but it’s almost impossible to time things perfectly.
The concerns of sellers are warranted, and buyers are fearful too. Those looking for property are often scared that they’re going to make a mistake and buy at the peak. However, those waiting to buy and hoping that prices will fall would be well advised to consider other factors. In the current market, the potential cost of delaying a purchase, namely interest rate hikes, is often overlooked. Even if housing prices dip five percent, the would-be savings are more than gobbled up by a half percent increase in interest rates. Moreover, any significant drop in housing prices is highly unlikely as the economy, inward migration and demographics have all aligned to create a growth market. This multitude of market influencers will prevent a real estate crash.
For the time being though, we will continue to see an increase in housing supply and softer demand as the market continues to balance out. In some sectors, particularly high-end properties, it will become a buyers market. That said, buyers compressed into lower price brackets due to changes in lending will continue to drive demand for property at lower price points. For this reason, entry-level homes under $600,000 should remain strong. For most sellers in this market, a good piece of advice would be to have realistic expectations on what price you will get for your home. Increased inventory is forcing those looking to sell to compete with their neighbours to impress the limited and somewhat skeptical buyers who are looking for a deal.
Trends in the market 18 months ago caused me to predict that prices would soften. I believe the shift in supply and demand is just now beginning and the market will likely move even more in the coming months. How long will it last? No one knows for sure as many factors come into play. Not the least of which, is what will happen with our provincial government in October. If our elected officials decide to scrap detrimental policies, the market could rebound aggressively. However, if those in power decide to continue down the same path, we’re likely to head into a slump phase of the market. Remember though, regardless of government policies, market volatility is natural. It’s important to remember that with our strong local economy, the sky isn’t falling and we won’t see a devastating correction like the one we saw in 2009.