LACKIE: Real estate market stats speaking but who’s listening?

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It feels like it’s been months since I wrote about signs of a softening real estate market.

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After February’s highs, it seemed hard to imagine that the run wouldn’t just keep going. After all, it’s been two COOVID years with highs that only get higher.

But then, of course, there were signs. Offer dates result in fewer offers. Perfectly beautiful underlisted homes that fall short of their price on the night advertised only to be listed higher again the next day. It seemed that buyers suddenly exhibited some reluctance and certainly some judgment – they weren’t ready to just buy everything.

The first real sign of trouble I noticed was in early March when my colleague had a hot ad in a trendy area and only got two offers after a week of non-stop showings. Her seller still beat her price, but it was all a bit confusing.

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I then had a listing beauty the following week which was nice and busy but only resulted in three offers. Again we had a great result but the clear signs of waning interest left me feeling that choppy waters lay ahead. At this point, interest rates were creeping up, but the real hit from the Bank of Canada was still only a guess. It seemed to me that people were arming themselves.

And now here we are. On the other side of this downtrend, borrowing costs are trending up and prices trending down. Exactly where we all expected we would find ourselves one day as interest rates cannot stay low forever.

For all the talk of bid, bid, bid, and the rampant speculation fanning the flames of our FOMO-driven marketplace, the flow of near-free money was the gasoline that kept the flames burning. And while interest rates are trending sharply higher, some of the madness we’ve witnessed over the last few years has apparently started to wear off.

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One need only look at TRREB’s April market statistics to see this moderation manifest itself.

Toronto home prices fell 6.4% month-on-month, the biggest monthly drop since April 2020, when the world ground to a halt with the arrival of the pandemic. With monthly home sales down 26%, even the bulls among us who firmly believe in the strength of this housing market must be asking ourselves.

Colleagues who insisted that everything was fine and that my observations were nothing to worry about are now beginning to change their minds. Everyone agrees that a shift is underway – the question is what the next six to 12 months and beyond will be like.

Will this be like so many of the previous downturns that turned out to be relatively short-lived responses to new policies and government intervention, or should we look to the market crash of the early 1990’s for signs of what is to come?

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Will it take consumers some time to appreciate the return in borrowing costs to moderate levels before getting back on board? Or will our broader economic precarity not provide enough stability to get us through unscathed.

Even the economists cannot find a consensus. Some reports say we should expect house prices to fall by 24%, while others suggest we’ll end up somewhere in the 5-7% arena, still a long way from where we were before the pandemic.

This makes this a particularly challenging time for real estate agents who are asked to advise their clients. The last thing you want to do is scare tactics because nobody knows for sure what’s to come – there are still people sitting on the sidelines who have cashed out to wait for prices to fall, only to find themselves long since priced out.

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At the same time, I scratch my head at the “real estate that only goes up” type brokers who still say now is a good time to buy. I sincerely wonder if they are paying attention to their markets and consuming media other than TikTok.

Overall, now is not a good time to buy unless, of course, you must have the income to comfortably support those storage costs and be willing to be in it for the long haul.

If you need more space, are relocating, or are planning to retire in the short to medium term with the equity tied up in the house, it is a mistake to put your life on hold in anticipation of an uncertain future. Get an experienced agent who can fight for you and get out. If you can land a property for 10% below February’s comparables, you mitigate a significant portion of the risk in my humble opinion.

Selling in the same market conditions that you must buy in generally means even repercussions.

That being said, for people who are still wondering if they should exhaust their line of credit to buy an investment property, I find it very hard to believe that this kind of risk is worth it.

Is it blue skies ahead? No not true. Are we entering a world of hurt? For some yes, absolutely. For the rest of us maybe, maybe not.

Do not you like that? I apologize. I’m just trying to be honest.

@brynnlackie

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