Unrealistic expectations can cause anxiety, it’s said. If so, there must be a whole lot of anxious buyers and sellers out there. The industry is currently teeming with agents’ tales of unmotivated sellers refusing to budge on impossible prices and bargain-hunting buyers dead-set on finding non-existent deals.
It’s a frustrating and puzzling landscape.
The British Columbia Real Estate Association’s chief economist, Brendon Ogmundson, notes that there’s plenty of housing demand Canada-wide due to factors such as immigration and the block of millennials at the prime age to become first-time home buyers. “But it will take a decline in rates to unlock demand and turn it into sales,” Ogmundson says. “This year will be all about what happens with interest rates.”
Things could start off rough, he warns, with the Bank of Canada raising the key interest rate for an eighth consecutive time, to 4.5 per cent, on Wednesday. But by the end of the year, Ogmundson and many others expect rates to have stabilized and the market to be rebounding – depending on inflation.
Limited inventory and flat prices
Currently, sales are down in most areas, and prices are flat, so houses are on the market longer, and buyers and sellers need patience.
“It’s a bizarre playing field now,” especially with inventory severely limited in markets across the country, says ReMax Canada president Christopher Alexander. “There’s more doom and gloom in the media than I’ve heard in my career.”
Sellers are reluctant to put their homes on the market, and buyers are holding back due to negative headlines, Alexander has observed. With mortgage rates on the rise and a lack of affordable starter homes creating a generational disadvantage, the current climate is especially challenging for first-time buyers.
In major cities, the cost of renting is now often as high as carrying a mortgage. “We’ve reached equilibrium,” Alexander states.
This isn’t great news, although, for some potential first-time buyers still on the fence, it may help tip the scales to the buy side in the time-honoured ‘buy or rent’ debate.
But how do you, as a realtor, help clients – first-time or otherwise – navigate this market where one size definitely doesn’t fit all?
Education and honesty
From Alexander’s bird’s-eye view, “The name of the game this year is education.”
Agents will need to keep clients informed to a greater degree, he says, providing accurate and honest information for each situation. Often, due to “working at street level,” realtors have more insight into the market than the media, Alexander notes.
The phrase ‘educate and inform rather than push and persuade’ is cropping up on industry online forums. It’s an enlightened maxim. Remember, too, that “It’s super important for buyers not to over-extend themselves right now,” cautions Alexander.
Be honest, including when it’s advisable that a client stay put and not sell.
Choose your clients wisely
Stay positive. Keep on top of training, new policies and government initiatives for first-time buyers. Expand your database of professional contacts, services, and lenders.
Clients may not realize that when the margin between lower and higher-priced properties narrows, it can be a good time to move up. Remind sellers that while their profit may be lower than a year ago, the purchase price of their next home will be too.
Choose your clients wisely. “Every realtor has wasted time with clients whose expectations are out of whack. It’s a big headache,” says Alexander. “If clients have unrealistic expectations around price despite all the information you provide, respectfully decline to work with them. Your time is too valuable.”
He’s confident that most clients are well aware that the market has changed since last year.
Regions that buck the trend
There are always anomalies – communities that buck the trend and maintain prices that remain largely immune to big market fluctuations (reportedly Sudbury, Ont., and Kootenay, B.C., among them). For clients who are highly flexible, these regions may offer an affordable alternative option.
In some cases, these areas may be far enough off the beaten track that they weren’t targeted even by the migration of people escaping large cities during the height of the pandemic.
That exodus has now “slowed down in a big way,” Alexander contends.
“I think a lot of people who moved to rural centres from the cities are probably pretty bored and are realizing that lifestyle desires don’t change overnight,” he laughs. “This year, a lot of people may re-assess, and we may see people moving back to the city.”
Exploring alternative options
In urban centres like Toronto and Vancouver, buyers can benefit from government programs pushing for densification – including laneway housing, lot splitting, and multi-unit dwellings. “There’s going to be some opportunity there,” Alexander says.
The condo market, while in a sales slump in many areas, is also still a potential source of opportunity, value, and financial appreciation. It’s interesting to note that, at least in Toronto, the price gap between pre-construction and resale condos is widening, with the latter now tending to offer more affordability. Pre-construction condo assignment sales – where the original buyer re-assigns the purchase contract to another buyer – are another option. So is co-operative housing.
Opportunities are still around. Lately, there even have been increasing reports of multiple offers, says Alexander.
The market will likely be touch-and-go for quite a while yet. But Jamie Johnston, broker/owner of Toronto-based ReMax Condos Plus, notes that due to divorce, work, a growing family or other life changes, there will always be people who can’t put off moving, no matter the market.
Find them, he advises.
Susan Doran is a Toronto-based freelance writer who has been contributing to REM since its very first issue.