September Real Estate Update

Everyone is still watching the real estate market to see what will happen next. 

It can be a somewhat complicated economic situation.  Several things affect the housing market.  No one wants to pay more in mortgage interest than they need to.  So, if interest rates remain high, there are fewer people who are willing to commit to an investment.  With lower interest rates, more money is available for investments.

Number of Properties on the Market

The number of properties on the market for sale plus the rate of interest determines property values.  If there are quite a few pieces of real estate, all of comparable location and condition, then buyers will probably negotiate a lower price for the property since they will be paying a higher interest rate on the loan.  That means the property will have a lower intrinsic value, not because it is bad property but because the interest rate comes into play.

Looking at August 2022, there were fewer sales compared with last year at the same time, but yet higher than in July 2022.  You may notice that there are more properties offered for sale and those that have been on the market for a while continue to be unsold (days on the market).  The Bank of Canada recently raised the interest rate, which will also impact the industry.

The good news is that the prices of real estate properties that have sold increased by around 0.9% when you look at the sales from August of the previous year.  They are selling at close to the asking price.  This is good because selling at lower than the asking price means the seller is willing to take less than they feel the property is worth just to get rid of it.  However, with longer days on the market, the more likely prices will reduce.

The greatest number of detached and semi-detached sold at $1 million to $1.249 million.  At the same time, 419 condos sold in the $500,000 to $600,000 range.  A similar number of 421 condos sold in the $600,000 to almost $700,000.  This is important because buyers will start looking at homes priced lower than they would like because they are unable to qualify for the higher prices coupled with interest rates.  As fewer buyers are able to afford the upper range of properties, these homes will soon be priced lower and more affordably to stimulate savvy investors.

The Real Estate Market is in Flux

All of this condenses into the fact that the real estate market in our country is in flux.  We won’t fully realize the impact for at least the next several months.  If the economy in general, slows down, there will be fewer sales.  Similarly, if the interest rates continue to rise, the number of sales will also decrease.  Conversely, if the economy begins to recover, the real estate market will be at status quo.

As September comes to a close, the statistics will be compiled, and we will be able to see how the trends are moving.  If interest rates begin to drop, we will see an increase in the market.  When this transition starts to fully form, the experts will be better able to predict how the market will react.