Inflation is on the rise and the only way to combat it, is to raise the rates! Two rate increases this year are scaring off buyers because they are waiting for prices to drop even more and sellers are holding onto their valuable properties waiting for this wave to pass - what's that doing to real estate? Senior economist Steven Brown at Capital Economics has said that the Bank of Canada doesn't need to be so aggressive with the rates since there are global factors that are also influencing inflation.
In our opinion, the rate of the increases may drive us into a recession and send the real estate prices into a downward trend, much before the real estate cycle would like it too. Even though home prices are going down and some units are being sold at a price lower than sellers would like, it seems as if the Bank of Canada isn't very concerned with what may come of the real estate market, because they are worried about inflation at large. Which we aren't to upset about - groceries, gas, cars, and daily essentials are getting more expensive meaning the quality of life may suffer, however, we also realize that people have dumped their life savings into their real estate hoping to build equity and retire wealthy.
We'd love to touch on the fact that, housing was completely unaffordable in the last 2 years. A lot of our clients were in the position to buy two homes and they decided to buy one. This kind of competition leaves first time home buyers and the newer generation in a position to tap out, or rent for longer periods of time. Though housing prices have generally been above affordable ranges, a slight correction of 8-10% next year will put new buyers in a position to afford.
We also want to touch on the sub segments of the housing market - detached homes are the biggest players in the market. Condo being a smaller and cheaper segment is what has kept the market afloat. Though there is a decline in their prices, they are the most sought after real estate right now! (Check our latest market post on our instagram page here) You'll notice that the numbers for just condos remains consistent from month to month as they are still selling close to or above the ask price.
So, now what?
Well, here are our tips for you to navigate this ever so active economy:
1. Save your money where you can. If you can't afford to buy, don't sweat it.
2. If you're looking to sell your home, really evaluate the strategy you want to go in with. Over pricing homes right now can leave permanent scars on your property because the sold data and length of listing never goes away
3. If you have the downpayment and closing cost, don't be afraid to buy a home. You'll get a better deal, and you'll get to experience the buying process without market pressure and with the lowest amount of competition we've had in years.
4. When it comes to real estate finance and economics, speak to a professional (US, speak to US!). The media and your neighbours will spin the stats with their own bias and feed you the wrong information. As agents, we're not afraid to tell you that prices are falling, but we've been around long enough to tell you what's going to happen in the next little while.
5. Smile, it's good for you :)
Questions? Reach out to us!