As we enter February 2023, the local real estate market continues to be a bit of a guessing game. How are things going to unfold in the months ahead? Interest rate hikes are coming to an end, so that is one part of the puzzle answered.
The first half of January was sleepy, but we started to see some signs of increased activity in the last half of January regarding open house attendance, more offers, and home sales firming up. Several sales were homes that have been on the market for a few months where sellers had reduced pricing resulting in offers.
New listing activity (as opposed to old listings coming back on the market) remained low, which may have put a temporary floor on pricing at the lower priced end of the market.
But I am certainly not suggesting we are reaching the bottom in our market yet. Increased listing activity moving forward could put continued downward pressure on pricing. Plus there are other factors like a possible recession and increased unemployment.
And mortgages renewing at double the current rate over the next year or so will impact the market as well (more on that subject in a future article). Most activity is on homes below $1- million, and the over million-dollar segment of the market will continue to be challenging.
Affordability continues to be a big issue, and as most analysts are now agreeing interest rates are not going down anytime soon, the only way for affordability to improve is for real estate pricing to decrease further. Most of the listings currently on the market in Centre Wellington have been on the market for extended periods, and further price decreases will be required to get them sold.
One thing I have noticed is homes being re-listed at the same price as when they left the market in 2022. Folks, if your home didn’t sell at that price in late 2022, it’s not going to sell at that price in February 2023. I’m going to keep saying it until you get sick of me saying it – if you want to sell your home, you must price your home to today’s market, not early 2022. Too many sellers are still in denial (and some realtors seem to be in denial too).
I get it, it’s hard to get those big numbers out of your head. But pricing has now adjusted back to at least early 2021 pricing, if not 2020 on certain home segments.
Will pricing revert to pre-covid pricing? It’s not as crazy as it sounds. But I don’t think our market is going to adjust that much. As I said last month, my recommendation continues to be – if you are thinking of selling in 2023, list early this year. There is a risk the market will continue to go down in 2023, with little probability of any price rebounds this year.
We have seen some good success lately, where we re-priced existing listings to match current conditions. So, the buyers are out there. Sellers will often say to me – “well, if they don’t like our price, they can still offer something lower”. But it often doesn’t work like that in today’s market. And my experience on the ground backs that up.
I can give you at least 4 recent examples where homes have been on the market with no offers, and after price amendments reflecting market conditions, the seller suddenly receives an offer (and believe it or not, MULTIPLE offers in 3 of those cases).
Even more telling – in most cases the buyers had looked at the home months ago and liked the property. But they did not offer. Buyers are willing to wait out sellers in today’s market and make the seller make the first move on price. Or the buyers move on to another property.
To recap, while there is certainly still downward pressure on pricing, it appears a number of buyers are willing to start dipping their toes back into the market on homes that are priced appropriately (unfortunately, there are also a number of buyers that don’t qualify for mortgages at current rates based on current pricing).
Most of the current activity is on homes priced at less than $800,000 – where we are actually seeing an increased frequency of multiple offers. Homes over $1 million are slowly starting to move again where priced appropriately – but this has taken price reductions of $200,000 – $300,000 in some cases. So, well below the early 2022 highs – but still above pre-covid numbers.
Still a transitioning market for sure – and a market where the realtor you hire matters.
Until next month, take care.