Whether you are listening to the national tv news or reading one of the national newspapers, you are definitely seeing that sentiment has turned negative on the state of the real estate market, with many now predicting a major correction in pricing moving forward. Sound familiar? Well, on the ground where I am, it is certainly starting to feel a lot like 2017.
In 2017, real estate pricing peaked out at 34% year over year growth in March of that year, followed by a fairly quick correction with an 18% decrease in pricing between March and August. It then took until June of the following year for pricing to stabilize and start to show year over year increases. And it was about 2 years before pricing got back to where it was.
Will 2022 be a repeat of 2017? Well making predictions is always a dangerous game, although I will note late last year, I did in fact say that sellers should sell in the first 4 months of this year. So sometimes I get it right. There are a lot of similarities in 2022 vs 2017, however there are also some major differences. Inflation was only 1.6% in 2017 vs 7.7% right now.
Unemployment is lower now compared to 2017. GDP growth is lower now than in 2017. We still have continuing supply chain problems and other post-pandemic challenges. And of course, there are different geopolitical issues now compared to 2017. With these variables, it is tough to know if the real estate market will follow the same path of 2017, or surprise us yet again.
In Centre Wellington, it is obvious the market is slowing down, but as I write this article, there is insufficient quantity of recent sales activity to get a clear indication as to the degree of price decreases we are seeing in our local market (the fact that there is not a lot of recent sales data is an indicator itself of a changing/slowing market). Homes are definitely taking longer to sell, and we are seeing a number of price decreases on listings. Seller expectations will have to adjust.
But I am not a “the sky is falling” kind of guy. Even with an 18% correction, you are still selling your home in Centre Wellington for more than early 2021. Houses will still sell. You just have to be more patient. And conditions like financing, inspections and sale of buyer’s property are back. Just like the good ol’ days.
Each market will be different throughout Canada. I still believe our local market will weather the storm better than some due to several factors. And not all properties will be affected as much as others. So, averages (i.e., an 18% decrease across the board) can be misleading sometimes. In other words, a very unpredictable market continues for the next several months.
The one wildcard in all of this is the current interest rate environment. A lot different than 2017. If the Bank of Canada continues with oversized increases in interest rates as they seem to be signaling, there may be a larger than expected impact on real estate pricing. I understand that they need to get overall inflation under control, and I’m not one to second guess people smarter than me, but they may not get the “soft landing” they were aiming for. Housing affordability is quickly evaporating with the interest rate increases. Either affordability gets even worse, or real estate prices will see a greater than anticipated correction.
One thing for sure, in this evolving market you need honest, straightforward advice from a professional who really knows the local market. Is it the right time to sell? For some, maybe not (it’s been a while since you heard those words from a realtor). It depends on your property type and personal situation. Realtors are going to have to work a lot harder and spend more of their money to get your home sold for the best possible price. And you certainly need a realtor who is a good negotiator in this market.
Until next month, take care – and enjoy the summer!