I hope you are enjoying this beautiful Ottawa summer weather.
It’s been a few months since my last contact with you and for this I apologize. The spring market was a very busy time for me and I was fortunate enough to assist many military personnel and their families find new places to live in Ottawa.
The Real Estate Market
Real estate in first half of 2012 was again different from other years. What was predicted to be a slower year due to government budget cutbacks started off quite positively in the first quarter with little sign of lack of consumer confidence in real estate. There was still an active buyer pool and many choice homes for them to choose from.
After the Federal Budget announcement at the end of March, many felt the cutbacks were not as severe as they could have been so our market continued selling. One big difference though was this year there were more homes staying on the market which meant buyers had more choices and didn’t need to make instant buying decisions in fear of being priced out of the market. In past years, spring sales brought a rise in home prices which sometimes compromised features or benefits in a property that buyers had to forgo just to get an affordable home. This change created a shift in the market indicators changing from a ‘seller’s market’ to a ‘balanced market.’ A balanced market means homes are still selling, they just take longer to do so. It also means that proper pricing becomes more of a factor. Unfortunately, there are always the few sellers in the marketplace who feel they should sell their properties for as much or more than the latest sales and they may not realize these values any time in the near future.
In June, Finance Minister Flaherty announced more changes that will calm home sales, but in the long run, the big picture will be good for Canadian real estate. These mortgage changes will restrict the number of high-risk loans which devastated the American real estate market when that market began to change. If you think about it, in slower markets, if there are a lot of power of sale properties on the market. They will pull down the values of all properties faster than if there were fewer power of sales. Yes, the new changes will no doubt eliminate a number of real estate transactions, but it will also help eliminate some of the higher risk transactions that can affect values in the future.
Is there downward pressure on home prices?
It’s too early to tell, but I don’t think so, at least not yet. Most spring transactions have already occurred and for the next two months we will be experiencing our normal summer-time slowdown. At this time of year, homes traditionally stay on the market longer, but that doesn’t mean that market prices are falling. What will be an indicator is the number of homes on the market in the early fall and how quickly they are turning over. I can’t help but think of my high school economics class where the teacher showed a graph of supply and demand on the blackboard.
Don’t forget, interest rates are still at an all-time low and by the look of things, that’s not going to change any time soon. If you are thinking selling, the only thing I would caution you about is to not set a high speculative price and to realistically create time lines to ensure you do not get caught carrying two (or more) properties. If you’re buying, don’t get trapped in a "bidding war" situation where you are paying over-market value. Naturally, I will work with you to help provide the best real estate advice possible.
Have a great summer!
Peter Sardelis CCIM