The weather is getting warmer, the grass is getting greener, and summer is just around the corner. As the season’s change, so too does the real estate market! The market has been on a wild ride ever since the latter part of 2020, which was followed by more growth in 2021.
Finally, in the Spring of 2022, we are graduating from what has been a very strong seller's market to a much healthier real estate market.
Interest rate hikes, talk of inflation, and global political unrest such as the very unfortunate war in Ukraine, are all factors that affect our real estate market.
As a result of these combined influences, April was the first time in the past eight months where available inventory was higher than the number of properties that have sold.
This, however, does not mean we're in a down market. We're moving back towards more of a balanced market, and that is a good thing.
TABLE OF CONTENTS
Interest Rates and Canadian Real Estate
Real Estate Inventory in Ontario
What is a Balanced Real Estate Market?
What Does a Balanced Market Mean to Mean?
The Take-Away
Interest Rates and Canadian Real Estate
The Canadian Government has been making its own efforts to cool off the market. This has been a hot topic for a very long time and we're starting to see some of the impacts with respect to increasing inventory. The Bank of Canada has already raised interest rates twice so far this year. First, was a quarter-point, followed by a half-point, with talks of an additional half-point coming in the first few weeks of June.
Real Estate Inventory in Ontario
As perhaps the worst of the pandemic is behind us, we are adjusting to the new normal, and people are listing their homes again in Oakville. Now that we are well into the start of spring, it is also typical to see more and more inventory come to market. At the end of April, we ended up with just under 500 listings, which is fairly normal for this time of year.
In the previous months, we were selling more homes than we were listing which put us into this aggressive seller’s market, making things very challenging for buyers. You probably know of someone who sold their home after a few days on the market and received two, five or even ten-plus offers. This was a very limited window in our marketplace and was driven by extremely low inventory levels.
For reference, last January we had one-fifth of the inventory we typically carry. This shortage of inventory coupled with slightly higher demand led to massive monthly home value growth. This kind of growth is not sustainable, and at some point, the market had to slow down.
Good product is always in demand and fewer bidding wars are not generally a bad thing. Clients are still willing to pay good money for well-built, quality homes.
What is a Balanced Real Estate Market?
A balanced market is a relatively simple term used to describe whether or not the supply is meeting the demand. If the Oakville real estate market is considered balanced that would mean that there is enough demand from buyers to equal the supply from sellers.
Why is a balanced market considered favourable?
Well, within a balanced market, sellers have more options available to them to accept reasonable, close-to-list-price offers. In a balanced market, homes will generally sit for an average, measurable, or predictable length of time – this varies from market to market.
In a balanced market, housing prices tend to remain stable and, for buyers, there is usually a sufficient number of homes to compare and choose from.
In a balanced market, the sales-to-active listings ratio is between 12% and 20%.
Being in a seller’s market means conditions are favourable for sellers to get higher prices for their homes. Being in a buyer’s market allows buyers to come in at lower prices. And balanced markets are, well, balanced.
With the combined increase in interest rates and homes available for sale, we're noticing fewer multiple offers occurring, which in turn, leads to a more balanced market. We’re still getting historically high sale prices but we're no longer getting the extra 10- 12 percent that we were seeing over the last several months.
We are beginning to return to a normal pre-COVID pace, where a home may be on the market anywhere from a month to three months, depending on the price point in the product that's offered. This market is a bit more realistic and us as agents are welcoming the opportunity to represent buyers and sellers on more of a level platform.
What Does a Balanced Market Mean to Me?
As trends are shifting, if selling is something you are considering, this is the time where proper pricing and marketing strategies are most important, as there are still opportunities to capitalize and sell for a higher price.
On the flip side, for buyers, there are more housing options available which will mean less competitive buying scenarios.
A balanced market allows for more negotiations on price, we will start to shift back to more traditional offer format with potentially a financing and home inspection clauses included. This is one of the major benefits of a balanced market.
The Take-Away
As the market changes, we must readjust our expectations. As inventory increases, it is going to take a little bit longer to sell homes again. This might mean having more showings over a longer period. However, we must remember that this is what a normal, balanced market looks like and that is the direction we are heading.
We are not in a down market, rather, we are coming out of the unsustainable market that began in 2020.
Moving towards a more balanced market is a good thing. You’ll find most real estate agents are actually pretty happy about it and the general public should be as well. More negotiations are taking place and for buyers, there are more opportunities for various clauses such as home inspections and finance clauses so that buyers can feel comfortable and confident when purchasing a home.
2022 will be another very good year in real estate, just not a frantic one.
If you would like to know more, give us a call at 905-338-2121 or contact our office at I[email protected].
Image Credits
Header Image Annie Spratt via Unsplash
Body Image 1 Goodale Miller Team- 78 Threshing Mill Blvd