When it comes to real estate, timing is important; likewise, timing is important for writing articles on real estate.
Unfortunately for me, due to print deadlines, I am writing this in mid-August, before some very important announcements are made – including will the Bank of Canada increase interest rates September 6th? Coincidentally, this magazine will be showing up in your mailbox at that time. So, you will know.
The only thing I know as I write this is inflation #’s came in higher than expected (3.3% – general consensus was 3%, and target is 2%). That raised the odds of a rate increase September 6th. But to be clear, a further rate increase will not be good for the real estate market.
A rate increase will certainly add to pricing volatility in the real estate market this Fall. If interest rates stay unchanged in September, this may bring some stability to the real estate market, but the best-case scenario in my view is sales activity improves – but pricing remains flat.
The highest prices for 2023 are now behind us (June 2023). As I alluded to in previous articles, other than interest rates, inventory of homes on the market will be a determining factor of what the Fall Real Estate market will look like.
In Centre Wellington, inventory (homes for sale) continued to increase to all-time highs in August, as home sales slowed down further. If this trend continues in September, rate hike or not, this will put downward pressure on overall pricing going into the Fall.
One observation I must make is the number of brand new homes hitting the market on realtor.ca – both people who bought as an investment or decided not to move in – as well as builders themselves. An indicator things are more challenging out there right now.
Some of these sellers had plans to rent out the home, but with increased rates, the economics no longer make sense from an investment standpoint due to higher negative cash flows and prices (equity) not going up.
I’m starting to see more people bought homes in the new subdivisions in Fergus and Elora on speculation over the past 2 years than I previously assumed. This will have implications for certain parts of our market moving forward.
So, am I telling people to hold off selling in the Fall? No. Remember what I always say – sell when it makes sense for you and when you are ready. Do not try to time the market.
I just want sellers to understand it may be a more challenging market moving forward, and one needs to adjust their expectations accordingly. And your patience will be tested. But as I say as well, homes are always selling and being bought regardless of the market.
What seems to be increasingly clear is lower interest rates are not in the cards for 2023. Unfortunately, this means some people that have been hanging on will have to sell. General consensus is it will be the end of Quarter 2 of 2024 before we start to see interest rates lowering.
Until next month, take care.
George
