Is it just me, or is this year just flying by? Yes, it’s July already. So, the early signs of a change in the market became much more pronounced as June came to an end. There’s a clear indication that, for the most part, the sense of urgency of buyers having to jump into the market at any cost has subsided.
To be clear, we are still seeing multiple offers and eyebrow raising prices paid on some properties, but these outcomes are becoming less and less frequent. In the last week, of the 5 new properties I listed, I only used the “holding offers” strategy on one; the others I simply priced at market price and sold them the old-fashioned way.
A return to normal… well, new normal. People ask if pricing has dropped. Let me answer that question this way – will houses in many cases sell now for as high as some of the results we saw earlier this year? Probably not. Are prices higher now than any time prior to January 2021? The answer is yes. So, in my books, factoring out a few months of irregular sales prices, prices have not dropped in the bigger picture.
In other words, 2021 is still a good time to sell, even though you may have missed the “peak” which happened over a 4-month period. While pricing is more stable, sales activity has definitely dropped. This may be due to the usual oncoming summer slowdown, buyer fatigue, or a combination of a number of factors in play. Time will tell. The effect of the new stress test parameters for mortgage financing will be minimal on the overall market in my opinion, although the government will take credit that their policy was the reason the housing market cooled down.
The real question is… what will the last half of 2021 bring in the real estate market? There are conflicting views out there. Some in the industry whose opinion I respect think that once the taps get turned on in the overall economy (as we exit the pandemic months) we will see another surge in real estate activity later this year.
Immigration levels will start to increase again too, resulting in higher demand for housing. So while the market is becoming less heated, real estate markets in many parts of the country are going to remain healthy in 2021. And based on growth in our area, the Centre Wellington real estate market will continue to do very well overall. Sellers will have to adjust expectations and realize that pricing in the market has largely plateaued for now, with single-digit appreciation more the norm moving forward – that the days of strong double-digit increases are behind us.
Likewise, realtors will have to adjust pricing and marketing strategies as well. Determining where “fair market value” on a certain home has landed during the transitional days of a changing market can be challenging even for the best realtors. Bungalows, well maintained homes that show above average, and homes offering generational living opportunities or possibility of an accessory apartment will continue to outperform. Houses needing a little work or have some quirky elements may take longer to sell (personally, I like quirky). Demand for condos in our area is starting to increase after a bit of a lull over the past 12 months.
My advice to all sellers remains the same – SELL WHEN YOU ARE READY. When it comes to selling your home, trying to perfectly time the market and predict what the rest of 2021 and 2022 will bring is something even the best crystal ball cannot guarantee.
As I write this article, we are up to 61 homes for sale in the Centre Wellington area – admittedly higher than the 40 or so we have been hovering at for much of the year – but still, a very small number. We need more housing to be built, plain and simple. There are not enough resale homes on the market to meet the needs of our growing community. Two new condo buildings being built at the north end of Fergus are nearly sold out already before they are even close to being ready for occupancy. And I’ve lost track of the number of calls from people needing rental accommodation. Not a good situation.
We are fortunate to live in a healthy community – a community people want to move to – but housing remains one of our challenges. If housing supply and demand continues to be out of balance, affordability is not going to improve. Of course, on the new home front, we can only hope lumber and material prices continue to decline further from record levels so new home pricing doesn’t get further out of hand as well. Watching local people getting priced out of their hometown real estate market is not fun to watch.
Being an optimist, as more semi-detached homes, townhomes and affordable condos get built, I see things improving on that front. But everyone, from neighbours of these new required developments to politicians and developers themselves, will have to work together to make it happen. Is there a buyer driven need for new estate lots and executive housing too? Of course. But higher density must be part of the overall mix in Centre Wellington to make affordability a reality. And to be clear, higher density doesn’t mean poorer quality housing. We definitely don’t need that (we have some good builders in our community – let’s work with them to reach a common goal).
This month, as I close out my article, I want to briefly touch on RENT TO OWN / LEASE TO OWN contracts – specifically for furnaces, air conditioners and water softeners. More and more, I see clients signing up for these contracts – often on the premise of worry free, cost free maintenance (and you don’t have to pay up front of course!). With due respect to the companies that make their money in this business, I strongly recommend most people AVOID these contracts. They certainly are not cost free.
One recent example – a client signed up for a new air conditioner – of average quality, probably could have purchased one for $3000 or less. Under the life of this contract… are you sitting down… the cost of that air conditioner – over $15,000. It would have been better to have bought it on your Visa at 20% + interest and pay it off in installments (although I don’t necessarily recommend that either, but you get my point).
When people buy your home, they do not want furnaces and air conditioners that are under contract. And when I see my seller clients get payout amounts that are more than twice the cost of the furnace than if they had bought it outright at the start, even after they have been making payments for quite a while… well, I get upset. I understand, sometimes people do not have the cash to buy a new furnace. Often however, they are older folks that have the cash, but get convinced to enter into these contracts.
Please, explore all options first. Do not feel pressured into signing any contracts. Get advice from others.
Until next month, take care.
George
