People Are Talking

What is making headlines at the moment in the Canadian real estate world is how the market has tanked since August. I want to offer my professional and somewhat personal opinion about what is being deemed as a negative turn in the market. I don’t entirely agree with this viewpoint because I believe strongly that we have just stabilized in Atlantic Canada, not tanked. The inflated home prices and the super competitive sellers' market prior to July was not sustainable in our relatively small real estate market compared to the rest of the country, not to mention that buyers have turned the tables because of tighter mortgage rules and more down payment funds required to buy a home. The new guidelines put in place in July really had a tangible effect on the housing market, almost immediately, and I believe it was a required measure in order to prevent any sort of "bursting bubble" affect that crippled the United States only a few short years ago.

Obviously the new guidelines were needed to stabilize and gear down buyers' debt loads and pre approval limits, or else the seemingly insignificant one percent drop in TDS (Total debt service ratio)* rates and amortization limits for mortgages would not have had such a profound effect on the real estate market. If Buyers' were really in the "safe" zone with their TDS (35% average) ratio and able to sustain a significant interest rate increase of 1% or more in the coming years, then one would assume that the nominal changes wouldn't have had such a knock out effect for buyers' pre-approval amounts. The very attractive record low variable interest rate options coupled with a 30 year amortization option caused a boom in the amount of buyers' ready and able to buy with their 5% down payment ready to go, but because of the supply of houses not being able to withstand the demand created by buyers' , we experienced record sales and a hopeless situation for buyers' who needed to be prepared to buy a house for thousands more than what the actual list price was! Appraisers were going crazy trying to find non-existent comparable properties that had sold, in order to not tank deals when the mortgage underwriters requested a confirmation of value for a real estate transaction. It was not unheard of that an appraiser would call the listing agent to ask us how we came up with our list price, and how we possibly could have gotten higher than asking! Amazing! It was a great situation for sellers' don't get me wrong, but it was also a daunting and stressful one for my buyers'. Houses were selling in 2 days or less and our buyers' were left to make immediate decisions about one of the largest financial purchases most people will ever make in their lifetimes.

A sustainable and stable real estate market must attract both buyers and sellers at any given time. However, when the need becomes too great for the supply available, we end up with a highly competitive and unfair market for those who are actually spending their hard earned and painstakingly saved dollars. Now it seems that all has returned to 'normal" in the real estate world and we are dealing with the unfortunate reality of our sellers wondering why their house isn't selling in 3 days like their neighbor's house did 3 months prior. We will undoubtedly notice price reductions and an increase in the average time it takes for a house to sell. It is important to note however that all is still wonderful and good for our real estate market, we just have to get used to the return to a stabilized and sustainable market. No need for doom and gloom for sellers, as they will still get a fair price for their home without 'giving it away', but the difference is that now buyer's will actually have an opportunity to negotiate fairly and without the immense stress and finnacial pressure of 3 short months ago. I am actually enjoying the calm after the storm and the return to "normal". Let's see what the next 3 months will bring, as I predict a positive and sunny forecast!...........Stay tuned!

*Please read my previous post titled "mortgage guidelines" for more information on TDS and amortization periods


 

    
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Ventura Realty Ltd. Halifax, Nova Scotia Canada