The Canadian economy continues to take the beating of a lifetime. Three million Canadians lost their jobs over the past two months, with millions more experiencing significant pay cuts. The economy is bad. Really bad. And it will likely get worse before it gets better. Cancellations of major public events continue with the cancellation of the CNE. This comes as no surprise to me, as I alluded to it in my recent blog on the impact of COVID-19 on the housing market. I personally think that it will take 10 years before we fully dig ourselves out of this mess.
What Does This Mean for Home Values?
The GTA experienced a whopping 67% drop in home sales for April compared with the same month last year. Sounds pretty bad and normally this would mean complete disaster for the housing market. We are in anything but normal times however. New listings have also dropped substantially, down 64% for the same month. As long as these numbers are similar, home prices will remain stable.
Spring is generally the hottest time for the real estate market. As temperatures rise (and eventually they will), so does demand for real estate. As we head towards summer, more and more people will get the itch to buy. However, most people are still sitting on the sidelines waiting for things to get better. Some are waiting for the market to bottom out, but this is not something that anyone can predict. It’s like waiting for a stock to bottom out before buying it. While some will get lucky, it’s impossible to get the timing perfect.
Think about it for a minute.
If it was that easy, then wouldn’t everyone be waiting for this magical moment?
Everyone would jumping into the market at the same time, and at a time when inventory down substantially. Home prices would instantaneously soar, as the demand would far exceed supply.
Good luck to anyone trying to buy in that situation!
Values have dropped marginally, but nothing too substantial. As long as we have a healthy ratio of buyers to sellers, the market will remain stable. Even during the pandemic, there are many encountering multiple offer situations. As long as this is the case, values will not drop. If it happens consistently, values will continue to rise despite the drop in overall sales.
Are You Thinking About Buying, But Waiting For the Right Time?
Even if values were to fall a bit further, this does not mean that you should be waiting. You may be thinking, “Why would anyone want to buy when prices are falling?”
The reason is explained above. You cannot time the market.
It’s just a matter of time before the market gets hot again, and when it does, prices are going to soar. You’re purchasing a place to live, not looking to make a quick buck. What difference does it make if the value drops after you buy unless you’re planning to flip it shortly after closing? If the value drops, then the only way you’ll lose money is if you try to sell at that time.
Ask yourself this: How long do you think your new home will suit your needs? Do you think we’ll still be in the middle of a pandemic when it comes time for you to sell? Until you’re ready to sell, you have not lost anything.
You may be thinking, “but I don’t want to overpay!”
Fair enough! But you’re not overpaying. You’re paying fair market value for the property when you buy it. You can buy it with values on the way down, or when values are on the way up. Logic tells you to buy when on the way up. But this is what everyone will be doing, and this is where you will face the most buyer competition, which may result in you paying even more for the home.
The Demand For Real Estate Is Heating Up
With people becoming more comfortable with this new way of life, and with the introduction of plans for businesses to re-open, consumer confidence will start to grow. It’s just a matter of time before everyone is working again. As consumer confidence builds, demand for housing will increase. We’ll start to see more listings, as well as more buyers. Everyone waiting on the sidelines is going to want to get back into the market in full force. The market will then become smoking hot once again. This could happen as early as later this year, or may not happen until 2021, but it will happen. It’s just a matter of time. When it does, home values will soar.
We’re now getting inquiries from people looking for a mortgage preapproval on a daily basis. People are starting to get that itch to buy, and this will only continue to grow.
There is a window of opportunity for buyers right now. I would not wait until the market is hot again. There is so much pent–up demand out there, so you may want to consider getting in ahead of the game.
For those considering listing their home, remember, everything is relative. Sure, you would get more money if you waited until next year to sell, but you’ll also be paying a lot more for your new home as well.
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The Paul Meredith Team will be donating $250 to local food banks for every mortgage we fund from April 30-July 31st, 2020.
With well over one million Canadians now out of work, the food banks need our help more than ever.
Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank
– How to Win The Mortgage Game in Canada, and has ranked as one of the top
75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage
Broker of the Year in 2018, and can be seen as the exclusive mortgage broker on
season two of TV’s Top Million Dollar Agent.