A lot has happened in the last month with more changes to come. We have a new premier who brought in new housing rules, and we will likely have another interest rate hike this week. These things are affecting our real estate market.
New laws affecting strata properties (condominiums)
Before looking at the sales data from November, for anyone who has not heard, there were significant changes to the Strata Property Act of BC at the end of November. The changes were designed to help renters (and they may) but they also significantly affect many strata owners AND those trying to buy condominiums. The day the changes were announced, I had two of my investor clients expressing how happy they were and one of my first-time buyers asking how the province could do this to buyers like her who are already struggling to get into the market. I think the changes may "sound good" but the impact is likely not going to be what the province intended.
The changes require strata councils to allow all strata units to be rented out and prohibit age restrictions except in buildings where the age limit is 55 plus. Prior to the change, many buildings did not allow rentals, or they restricted the number of rental units. Some owners prefer that as they believe owner occupiers will take better care of the building and be better neighbours. Some also worry that investor owners will vote down costly work that might be required to maintain the building.
It remains to be seen whether condo owners will challenge the legality of these changes.
November housing numbers
Interest rates and lack of buyer confidence continue to push sales down. While the rates are still very low historically speaking, many buyers have not yet adjusted to the rapid increases. We are likely to see another rate increase this week and potentially more to come given what is happening with inflation.
We will also see in January what happens with the Buyer Rescission Period (allowing buyers to back out of otherwise binding contracts) and the Foreign Buyers' ban. I will provide more details on these in an upcoming newsletter. If you would like more information now, I am happy to discuss. In a nutshell, these measures are meant to cool the housing market. The market is currently VERY cool so hopefully the changes will not make it worse.
There are still a lot of buyers out there looking but not buying. An extreme example of this was a recent case where a condo (not my listing) had approximately 60 showings but did not receive a single offer, even after lowering their price to what seemed like a reasonable level.
Prices have inched down a bit but are still up from 2019 AND likely higher than they will be going forward, possibly for the next few years.
It can take quite a while for homes to recover from a peak back to the peak prices. The National Home Price Index in the USA shows that after the April 2006 peak, it took until October 2017 for prices to reach peak again. In Toronto, after the 2008 collapse, it took 13 years to get back to peak prices. In our area, peak to peak is often 3-6 years but we cannot predict the timing. We can’t predict how long our market will take to reach the most recent peaks again. Fortunately, it has not fallen much yet, but sellers may want to consider the strategy that works best in their situation considering both the current and future anticipated market.
In November we saw:
-sales were down 52.9% from November 2021
-sales were down 15.2% from a month earlier, October 2022
-sales were 36.9% lower than the 10-year average for November
-the number of homes listed for sale was up 28.5% when compared with November 2021
-the number of homes listed for sale was down 6.8% when compared to a month earlier, October 2022
-there were 28.5% more homes on the market at the end of November 2022 than there were in November 2021
-detached home sales were down 50.8% from November 2021
When you look at the last several months' numbers, obviously things are getting progressively worse for sellers and better for buyers and investors.
Those who are upsizing should do very well as the best values are in the higher price points. So even if you sell for less than expected, moving up you will be buying for even less-the gap is key. The gap generally favours up-sizers in down markets.
If you are downsizing, at this point your price has not gone down as much as it is likely to-so time probably is not your friend (i.e. if you plan to sell in the next 2-3 years, sooner is probably better if you are downsizing or cashing out).
But again, to put things in perspective for sellers, the benchmark price at the end of 2019 was $1,001,000 compared to now at $1,131,600...So in theory (benchmark prices are not perfect!) sellers are, for the time being, still making significantly more now than they would have in 2019. We expect prices will drop down to where they were in 2019 (or lower) but for now sellers are still doing better than they were before the unprecedented Covid spike in prices.
As is always the case, the good news for those buying and selling is that if you are doing both in the same market, it usually all balances out.
As always, I am happy to discuss your individual circumstances-obviously the impact of various factors differs for each situation. If you have friends or family struggling with what to do in this market, please tell them to call me to discuss. You don't need to be buying or selling to discuss the market-I am always happy to provide information and advice.