People see the oil price dropping and imagine a variety of scenarios. It’s always interesting when people imagine scenarios when they know so little about something.
Most people imagine that real estate prices drop directly and proportionally to oil price. That isn’t the case. It might be the case if the oil industry was the only industry contributing to our economy. Some people think it is, but again, that’s not the case.
What affects real estate price mostly is the general public’s misunderstanding and apprehension due to fear.
Here is what will happen to the market this year whether oils stays low or climbs again. Because the oil price is currently low,sellers, who assume the market will fall, will try and list to sell before it does – causing a surplus of listing inventory. At the same time a significant number of potential buyers will postpone their purchase plans, not wanting to buy high before the market falls…
Both sellers and buyers actions, due to their fear that the low oil price will directly affect the real estate market, will causing a self fulfilling prophecy. The increase in listing inventory mixed with some buyer’s apprehension to make a purchase will cause a surplus and a lack of demand (chart below). When this happens prices drop.
Will prices drop in Central Alberta? If prices do drop it will be very slight. Remember, there will always be people needing to buy, or buying because they understand the economic affects and aren’t worried and see how they can capitalize. In addition, if a person is buying long-term there’s practically no risk. The powers that be, who control the price of oil, can’t afford to keep it low for long.
After reading this article a seller might ask, ‘what should I do,’ and a buyer might ask the same? Here’s what I recommend for for sellers and buyer.
If planning to sell I recommend to list now. With buyers only starting to slow, and listings piling up soon, listing too late will leave you in the upcoming mix of high inventory. If selling now choose a reasonable price. Pricing high will slow a sale in more ways than one, and a slow sale will also leave you for sale in high property inventory market.
If planning to buy, now is the time! From here on we will witness a ‘buyers market.’ Fewer buyers than normal and high inventory will be the main factor. A buyers market is when the buyer has the most leverage (power) in the purchase negotiation. Take advantage of it while the low oil price scares less savvy buyers. If you wait till prices rise, and they will, you won’t know till after it’s happened. Stats are delayed and when they finally display prices going up they have already gone up.