Is the Real Estate Party Over?

As Toronto Real Estate Goes, So Goes Shelburne Real Estate

“The Party Really is Over in Toronto Housing Market” (Huff Post)

“Toronto Housing Market Hits Deep Freeze as New Rules Bite” (Bloomberg)

“Real Estate Board Predicts Flat Prices and Sales This Year” (Toronto Star)

Just Because It’s Happening in Toronto Does that Mean Shelburne and Area Too?

We are not an island. If GTA property sales are decreasing in value or number of sales, we are likely to follow the same trend. Eventually. 

Last Spring                                                                           

Last year at this time there were ten properties for sale in the Town of Shelburne. This year there are forty-six.                                            

Buyers felt if they didn’t buy a house at that time they might never ever afford a purchase. They bid and bid and bid until prices increased pretty well daily. Inventory didn’t increase.

Until it did.

What About This Year’s Buyers?

We are early into the spring housing market; some properties are selling, but not at the frantic pace of 2017. Some houses are sitting on the shelf. What’s the difference?                                      

Buyers now want value for their money. If houses are perceived to be on the market at last year’s supposedly inflated price, Buyers may give them a wide berth.

If a Buyer feels the home is well presented, well priced and in a good area, it may sell fairly quickly. If there is a lot of competition at the price, Buyers feel comfortable waiting for price reductions. Some homes are still selling with multiple offers, but usually well below list.

New Mortgage Stress Test

Yes, some Buyers now cannot obtain a mortgage at the same level as last year. The new stress test has kicked in and surprised some with its stringent rules. There are some solutions to this, but realtors are going to have to think a little differently about how to finance purchases. It’s been so long since qualifying for a mortgage has been a little difficult that many realtors have never had to try different financing options.

What Can a Buyer Do to Qualify for a Mortgage on their Dream Home?

The pain is real for many, especially for first time buyers.

Unfortunately, the solutions may also be unpleasant.

They include:

• Downgrading expectations. A townhome instead of detached. Town instead of country. Older instead of newer. A basement apartment to rent.
• Family assistance. The higher the down payment, the lower the mortgage (and monthly payments).
• Saving more money for the down payment and buying in the future.
• Creative financing – Creative, not fraudulent. There are options.

Sellers

In short, if you really truly want to sell your house you will. When the price is right there is always a buyer. You may not like the price, but there is always a sale for the truly motivated. Of course, the better the house shows, the better chance of snagging a buyer.

Don’t forget, prices have risen by very large percentages in the past few years.  Prices in 2017 were almost double those of 2010. If you have been in the house since then, can you sell with a smaller profit? If so, sell and move on.

Highly Leveraged Sellers

Some have purchased in the past few years with small down payments. If prices decline you may be told your sale price will be too low to pay off the mortgage and the expenses of selling—realtor, lawyer & bank penalty fees.

It has been a long time since we have been in this position; but I sure remember the early 1990’s when I began selling real estate. Many a kitchen table discussion involved this very scenario.

We have been so focussed on the past years on low interest rates, we’ve forgotten how to arrange home sales in ways that do not involve paying huge penalties to the financial institutions and arranging new mortgages for buyers.

There are ways to get around this; but even today’s financial advisors have never learned how. There are some good solid methods to deal with the problem (that don’t “break the bank”, so to speak).

Selling and Buying

This is a little trickier. My advice is to always buy and sell in the same market. That way you won’t lose equity. But prices in this year’s market may change a little. If you aren’t going to sell at a price that allows you to buy elsewhere, as you feel the new purchase is too highly priced, you might just opt to wait it out. When the price of the new purchase comes down, so can yours. A realtor you like and trust in your preferred area is invaluable in this case.

Conclusion

We really don’t know how this year will pan out. Maybe the spring and fall will be very strong, and hold prices at last year’s level. But if not, we need to be prepared to go forward to fulfill our needs with our most valuable asset – our home.