Since the start of 2022, the nation has anticipated a series of increases to the target interest rate. In March, the first of these hikes took place. A few weeks later, we are starting to see the effects on the real estate market. Sellers still have the advantage, but there has been a slight shift.
Houses are staying on the market a day or two longer. Multiple offer scenarios still happen, but not as frequently. A few short months ago, if you listed your house, it was all but guaranteed to sell. That is no longer the case. While most homes still sell quickly, there have been rare instances where the property didn’t sell at all.
The real estate market is more unpredictable than ever, but one thing is for sure: Prices remain at all-time highs, and it is an excellent time to sell. Here are some articles to help you take advantage of this hot market:
Are Other Factors at Play?
Interest rates aren’t the only driving force behind the changes in the real estate market. Supply chain issues and the war in Ukraine have caused the highest inflation rate since 1991. Gas prices have increased dramatically, and this cost has trickled over into everything from groceries to hardware supplies. As the cost of living increases, some would-be buyers are starting to think twice before purchasing a house. Property values haven’t come down, but there is less competition now for the few listings that are available.
In addition, there is more news that could shake things up even further. The Bank of Canada is under intense pressure to do something to combat this record-breaking inflation. Raising the target rate is one way to bring things under control.
Another Increase is on the Horizon –
What Does it Mean for Sellers?
Economists had predicted the hike in April. What they didn’t expect was how significant the increase would be; the first 50 point rate hike since 2000. The Bank of Canada has indicated in June we could see another 50 point rate hike. Everyone is waiting to see how this will affect the real estate market.
The question on everyone’s mind is, “Will housing prices drop significantly ?”
Some experts predicted that the market might cool off after the first interest hike last month. What have we noticed so far? Housing prices dropped slightly. The traditionally busy spring market has added a few more listings, but there are still far fewer houses for sale than usual. Competition is still high. It’s common to see multiple offers on your listing, but it is no longer a sure thing. Has the market cooled off? Perhaps slightly, but the situation still strongly favours sellers.
Good News for Some Buyers
Many potential buyers have been waiting desperately for housing prices to drop. It happened slightly after the April rate hike. Unfortunately, many buyers may still find themselves unable to qualify for financing, even if prices drop significantly. The higher interest rate can increase your monthly payment, negating any benefit of lower prices.
For some buyers, the rising interest rates are a double-edged sword. As the cost of borrowing becomes higher, fewer people can qualify for a mortgage. The result is less competition for those still in the market who are lucky enough to have the means to buy a home.
Finally, there are options available as more homeowners decide to take advantage of the hot seller’s market. However, there is no sign of prices coming down significantly.
The good news is you may have fewer bidding wars to contend with, which means you might not have to bid hundreds of thousands over asking to secure a purchase.
Don’t let the competitive market get you down. Here are some helpful articles to help you succeed in buying your next home:
- The First Time Home Buyers Guide
- Your Questions About Downsizing – Answered
- Your Guide to Upgrading Your Home
There is Still Hope for Buyers
The situation is still challenging for many people, especially first-time buyers. However, that doesn’t mean that there isn’t some hope to get into the market. You may have to use some creativity or think outside the box a little.
What are your options?
Move outside of the city
Housing prices are highest in the big cities where there is more competition. In the past, you may not have had a choice where to live because you needed to be able to get to work. Now, the pandemic has changed the workplace, and many employers are choosing to continue with the work from home model. If you don’t have to commute, you can look to a less expensive area to make your purchase.
Buy An Investment Property
If you buy a house with a basement apartment, you could live in the lower unit. By renting out the larger space, you can cover most, if not all, of your monthly mortgage payments. This method has helped many first-time buyers get started in real estate. It’s one of the smartest ways to succeed even in this ultra-competitive market.
Make a Joint Purchase
Nothing strengthens your buying power like pooling your resources with other people to purchase your home. By joining with close friends or family members, you can all begin to build equity faster. As an added benefit, you might be able to afford a home with more space rather than settling on a tiny condo.
Are you ready to explore more creative options to buy or sell a home? Our dedicated team is happy to give you helpful guidance on your next step. Contact us today!
