Over the past year, COVID 19 has not been the only hot topic in daily news reports and in other media. Canad’s blistering hot real estate market has also garnered a lot of attention not only here at home but elsewhere as well. Over and over we repeatedly hear about Canada’s insatiable demand for residential real estate and that it’s a “Seller’s” market with multiple offers, properties selling for well over their respective asking prices which drives the average price ( a largely meaningless number) higher. This may be good news for Sellers and yes REALTORS®, but when it’s a Seller’s market the question is where does that leave Buyers?
With such a robust market, Buyers seem to be the forgotten component of the residential real estate transaction and they shouldn’t be. It is my opinion that for real estate to be equitable for all we need to get back to “balanced” market conditions. Real estate transactions should be viewed as we would look at professional and or amateur team sports. Whether it’s hockey, baseball, football, soccer, tennis or things like curling there are two teams or sides. Whatever the sport or game is, the teams need to be balanced because if it they aren’t, one side will get thoroughly beaten. Let’s face it, when a game isn’t close, spectators typically end up complaining “what a lousy game that was.” Real estate activity right now is like two teams meeting for a match with one side being highly favoured, the Sellers. Another way to look at it? Think of it like taking a trip to the nearest casino. The deck is stacked in favour of the “house,” no pun intended and given current market conditions house Sellers are clearly like a casino, the winners.
While it may be a “Seller’s” market, 50% of every real estate transaction involves a Buyer(s). Using the sports analogy, we as REALTORS® act as the team’s coaches. If we list a property on behalf of a Seller, the first challenge is to market the property as we need the opposing team ie: Buyers to show up. Secondly, the playing field needs to be relatively level otherwise it’s a lopsided match and that’s where we are today. That may work in sports as there is always a winner but if a Seller fails to sell and a Buyer fails to buy, neither side wins.
We have an often repeated phrase in real estate that in order to get a property sold, “it takes a willing Buyer and a willing Seller.” The property will not get sold if one of these two parties doesn’t show up especially the Buyer(s) side. In recent months Buyers have been showing up but the inventory of properties listed for sale on the MLS® System has been somewhat low. There has been an growing demand for residential real estate in our area and several factors have helped to fuel that. During the past year we have seen a strong turnout of people looking to escape large urban centres such as the Greater Toronto Area (GTA). To a degree, COVID 19 with more people now working from home has helped to fan those flames. Second, Sellers have been getting strong prices for their GTA homes and when moving north, they have the ability to purchase an equivalent home or better in the local market often for considerably less. Third, mortgage rates remain at record low interest rates thus allowing Buyers that choose to do so, borrow more money thereby buying larger more expensive homes that than they normally would. As I have stated before, home sales over $1 million in our market in 2020 were up 178% last year totalling 353 properties compared to 127 in 2019.
As an active and full time REALTOR® for the past 20 years, I firmly believe we need to get back to a “balanced” market, the real estate playing field needs to be levelled in order to stable both sales and pricing. Having a home over one’s head is not a luxury, it’s a necessity. Given the state of the economy today and the unknown as to how it bounces back from COVID 19, now is not the time for the widespread driving up of home sale prices.
Leading economist David Rosenberg was interviewed recently on BNN Bloomberg and what he says made a lot of sense, I urge everyone reading this post to hear his thoughts (click the Bloomberg link above) on both Canadian real estate and the global economic recovery stemming from this pandemic. According to Mr. Rosenberg, the Canadian unemployment rate during the last two recessions we experienced was 5.5%, today we are sitting at 9.5%. Rosenberg’s prediction is that it will take five years for the global economy to rebound from the impact of COVID 19.
Looking at all the available data plus the forecasts from economists such as Mr. Rosenberg two things are abundantly clear and I am speaking specifically about Canada. First, now is not the time for Canadians to be taking on increased debt and that includes overpaying for houses just because low mortgage rates allow you to do so. Canada’s mortgage debt near the end of 2020 stood at $1.66 Trillion and was growing a an ever increasing pace. As as long term REALTOR®, now is now the time to get caught up in multiple offers which generally means foregoing conditions such as financing and home inspections. Secondly, economic recovery is largely based on a strong labour market and with 9.5% unemployment we are a long way from that. Even if two spouses earn significant incomes and can carry a hefty mortgage, if we are several years away from a strong economy what happens if one spouse loses their job or interest rates creep up? Can the remaining spouse carry the debt load? Right now there is no indication that interest rates will rise any time soon. Canada’s economic recovery seems to be based on encouraging consumers to spend more. Nonetheless there are many questions that people should be asking themselves as we navigate these turbulent waters.
Through the course of my real estate career I have always treated my valued clients by putting their interests first. More than ever, I view my role and that of REALTOR’S® as being one of a consultant, a provider of relevant and quantified information to help you make informed decisions. Yes now is a great time to sell and I have had that conversation with several of my clients. On the flip side Buyers may do well to wait until the real estate frenzy we have experienced over the past year or so cools off. Is a low mortgage rate any good to you if the house you buy today is worth 20% less or more in a couple of years? Only you can perhaps answer that but it worth pausing to think about it.
As stated earlier in this post I am a big advocate of seeing us getting back to a “balanced” or stable market where both Sellers and Buyers can get back to competing on a level playing field. Over the long haul, real estate has always proven to be a good investment provided it is bought at the right time, under the right conditions and for the right reason. That is where a qualified and an informed REALTOR® can be your biggest asset and I have built my business on that basis. It’s the reason I wrote this blog and produce regular Market Reports.
As always I look forward to your comments and if you have any questions or would like to confidentially discuss your real estate selling and or buying needs in 2021 or beyond, please do not hesitate to Contact Me.
In the meantime, I hope that you and your loved ones stay safe and stay healthy.