Before the days of bidding wars and intimidating offers, the real estate market was cyclical and fairly predictable.
There was a spring market, which was usually the busiest time of year, and there was a fall market, where action usually picked up after a quiet summer.
However, over the past decade, the pace of the real estate market has accelerated and real estate agents have been forced to quickly adapt to the rapidly changing market, particularly when the pandemic hit and rates increased. Interest remained low for a long time.
Things changed again last year as interest rates began to slowly rise, forcing real estate agents across Ontario to try to advise their clients as best they could in an ever-changing landscape.
In January, many thought the Bank of Canada was done raising interest rates and the market began to heat up in the spring, causing rates to rise in June and July, said Robert Hogue, chief economist deputy of RBC.
“We saw in July and August, with the most recent numbers, and especially in August, that housing retail activity declined,” he explained.
After interest rates rose, sales slowed in much of Ontario, a sign to some real estate agents that we may be seeing a return to the old ways of real estate.
“I think we’re starting to see a little more predictability in the market versus the volatility,” Kitchener real estate agent Tony Johal said of the return of past real estate markets.
Ottawa real estate agent Nick Kyte said traditionally the summer market is slower as people are away.
“If they haven’t purchased a property by July, they tend to take August as a vacation month, going to the cottage or just enjoying summer activities. And then they come back into the market in the fall,” he said.
Much like the rest of Ontario, it was a slow summer in Toronto, and by the first week of September people started registering and looking again.
“Honestly, we’ve all been sitting on our hands for the last few months thinking, ‘Geez, I hope this changes in the fall,’ and it seems like it has,” said Brendan Powell, Toronto real estate agent.
He noted that some clients were still looking in Toronto this summer, but were not able to find properties that met their needs.
As the real estate market appears to be moving closer to a more traditional market, many real estate agents PKBNEWS spoke with believe there will be an uptick in sales during the fall months as people will return from summer vacation.
“There’s going to be a little bit of a spike right now in the fall market,” Hamilton real estate agent Rob Golfi said.
Johal was also cautiously optimistic about expectations for the fall market.
“I don’t think we’re going to hit spring numbers. Interest rates remain unchanged and I think that will have an influence on prices and overall activity,” he explained. “I anticipate that the fall market, leading up to Christmas, will be quite consistent and strong.”
Hogue shares Johal’s cautious view on what will happen with Ontario real estate as fall approaches, saying the seasonally adjusted numbers for summer were much worse than spring sales.
“Once you take that into consideration, the traditional slowdown, even then, the July and August numbers of this year were a slowdown compared to what we saw in the spring,” the economist explained.
He also noted that the rebound seen in the spring appears to have reversed, which suggests things to come in the fall.
Buyers were cautious in the fall of 2022 and will remain so in 2023, especially with the possibility of another rate hike in November if inflation persists.
“Buyers are acting like they did last fall, and it was last fall that we saw continued rate hikes,” Kyte said. “So if buyers were going to buy, they wanted to make sure the house was in good condition, that it was what they were looking for.”
Hogue says RBC believes there could be at most one more rate hike from the Bank of Canada, but current rates are likely high enough to keep most first-time buyers away. House.
“It might take a month or two for the market to come to that conclusion,” Hogue said of the idea of ending rate hikes. “And then you might see some people come back. But the fact is, affordability is still a big issue, especially for first-time homebuyers.”
The economist also noted that if unemployment rates rise, it could drive people out of the market.
“We also believe that the Canadian economy has already entered a very slight recession,” he said. “This therefore risks undermining the confidence of certain people. »
Kyte looks back at how sellers reacted last year, providing an opportunity to explain how they might act in fall 2023.
He said if the houses were priced right, they would move, but if not, they would make adjustments.
“Some sellers decide to maintain the status quo, others decide to adjust their price downward to attract new buyers who may want to buy before winter,” the real estate agent said of the market. ‘Ottawa. “And others just decide it might not be the right time for them to be in the market.”
In fashion now
The Ottawa real estate agent noted that if that were the case, some sellers would take homes off the market and relist them in the spring, which is traditionally a busier time in real estate.
In Toronto, Powell says the slowdown has created a more balanced market, which has allowed conditional offers to return to the market.
“There’s a lot more caution and we’re seeing mostly conditional offers, which is kind of what it should be,” he said.
“Conditions are a normal and intelligent part of a balanced market because people do due diligence and protect themselves from risk.”
That’s not to say that bidding wars have completely disappeared.
Johal says about half of the homes that come on the market are priced based on bidding wars, while the rest are priced based on market value.
While many buyers remain hesitant about the idea of a bidding war, Johal believes most now expect to see price incorporated into listings.
He explained that if several homes in an area were priced at $600,000 for a bidding war and only one was priced at $700,000, some buyers might a*sume the highest-priced home could be settled for a bidding war at a higher cost.
“The problem is they’re going to look at your ad and think you want $800,000 and avoid it altogether in many cases,” he said.
“While we’re still seeing bidding wars these days, we’re also seeing buyers place conditions on homes when they make an offer. I think the last year of uncertainty has really made a lot of people stop and think about real risk and real volatility,” Powell said.
He pointed out that five years ago, conditional offers became rare as people competed for a small market.
“People have thrown caution to the wind at times and I think the last year has reminded everyone that there are real risks involved in any type of market like this,” he said. “As buyers are out and looking, people are more cautious than they would have been, say, two years ago.”
He said those warnings include people making conditional offers, as they should.
Golfi said that while this might scare off some sellers, they should probably sell as soon as possible.
“I think it’s going to take longer to sell a house (in the future). In the next 12 months, it will take more days for the market to grow and grow,” Golfi said.
While real estate agents expect home prices to move fairly quickly in the fall as they traditionally would, they also expect the market to slow down in December, which could be a good time to buy.
“I think it’s the best month of the year as a buyer. December and even January, those are the two best months,” Golfi said. “If you’re thinking about buying a home and want to get a good deal, but inventory can sometimes be a little difficult during those two months.”
Kyte also said the price could suit shoppers as the holiday season approaches.
“If you’re thinking about buying, you want to buy when not everyone is buying because that’s when you can get a good deal, which is traditionally fall, when the market starts winter,” he said.