Here it comes again! It seems as if every street you drive down lately has another house listed for sale with the big shiny Real Estate companies sign out front. Aren’t we supposed to be recovering and home prices were set to rebound? Isn’t the recession over?
Instead, here we are approaching inventory levels we haven’t seen since spring of 2008! That’s when we peaked at around 15,000 listings in Calgary and area. This overstock of properties for sale ultimately led to values decreasing even more and causing a further slowdown in a weak market as properties were everywhere and buyers had little competition.
So where are we sitting now? Well as we hit the end of June, we were sitting with a numbing 14,066 listings on the MLS. That is almost 5,000 listings higher than the same time frame last year! To make this even more frightening, sales are down by over 900 properties from June in 2009. So, once again, does this mean it’s time to panic?
If you are prone to panic, I guess now is as good a time as any, although I believe this will be short term and you might be getting anxious over headlines only. The bad news is prices are going to get pushed down marginally as the extra competition among sellers mounts; the good news is that homes are still selling if they are priced right and my Pollyanna crystal ball still shows considerable upside for the fall.
I’m not expecting prices to plummet a huge percentage; they will most likely come down only 2 or 3% short term as the market once again stabilize and buyers take advantage of frantic sellers. Based on average home prices this should be around $8,000 to $12,000 on a property, which shouldn’t be cataclysmic, unless you were close to 100% financed. Also, by short term, I am not expecting this to last much longer than the summer and then to see another surge of increasing prices again this fall.
You might ask at this point, why I am expecting it to rebound so quickly. My thoughts are that the market slowdown is more directly related to the huge surge in the markets earlier in the year rather than anything else that’s currently taking place.
If you look back to February, March and April this year, there was significant uncertainty how the new mortgage rules would affect home buyers and there was a strong feeling interest rates would be increasing very shortly. This pushed a larger than normal amount of buyers into purchasing sooner than they planned in order to take advantage of low interest rates and easier qualifying.
With this large portion of both first time buyers and home owners being suddenly removed from the market it was bound to slow down as buyers disappeared. Then to top it off, we added in the small increase in interest rates and it managed to push even more buyers to the side as they re-evaluated whether to purchase or wait. Is it any wonder then that fewer homes are selling?
So, here we are in July and people’s thoughts have moved to enjoying the few beautiful days we have during our summertime and less to a new home. However, by the end of summer, this will all change. We should see further stabilization in the economy, allowing more people to contemplate purchasing a new home without the uncertainty of potential job loss, prices will have decreased, making it more attractive and affordable, interest rates should remain steady and the overall mood of the Canadian economy will be once more optimistic. This should plant the seeds for some steady growth during the fall and a great time for the market!
Or at least that’s how I currently see it, anyone else have some alternative viewpoints?
Interesting thoughts! I hope that things are stabalizing:0) I think you should publish a book or do it in posts—whichever is going to benefit you the most. You help a lot of people and should get some financial kick back for that.