What Does Selling in the Next Year Look Like for Canadians?

What Does Selling in the Next Year Look Like for Canadians? What Does Selling in the Next Year Look Like for Canadians?

It’s no secret that real estate markets across the country appear to be cooling off with more inventory, fewer buyers, and lower prices. This is good news for buyers who can afford to purchase with rising interest rates, but what if you want to sell your home? Are you heading into your golden years and looking to downsize, or growing your family and looking to trade up? What if you want to sell now, but you’re worried if it’s the right time to sell?

Context: The Market is Cooling 

Interest rates have been on the rise for a few months, making it harder for buyers to borrow the money they need to purchase a home. This has the effect of reducing the number of buyers competing for available properties. Without buyers competing, prices are not being driven up the way they were the past two years when there was high competition in an environment with low interest rates and low days on market. 

With less competition, buyers take their time to make decisions. The consequence is that homes sit on the market longer. In a seller’s market, like the one Ontario has recently come out of, homes fly off the market due to increased demand and competition. At the other end of the spectrum, a buyer’s market, homes stay on the market longer with the result that sellers sell for less than they would have in a multiple-offer scenario. But what is less? Maybe some perspective is in order here. 

Perspective: Home as an Investment 

Lower and higher are relative terms, but what are you comparing to? A graph from the Canadian Real Estate Association shows a steady climb from 2005 with prices more than doubling since then, and in some cases rising by four times their 2005 prices.1 

The 2021 real estate market saw record high prices in Canada and, even though prices are cooling off now in many provinces, they are still well above pre-pandemic highs in most regions. The wisdom in commerce is to buy low and sell high. Certainly, with real estate, most of us cannot afford to sell our homes for less than we paid. If those market conditions are continuing to cool, as predicted by Desjardins analysts, your home value is likely to remain above its 2019 pre-pandemic value.2 

If you are not facing a distress sale on an over-leveraged house, remember that selling prices now are so far above historical prices. When weighing the balance of what you could get for your house now, it is important to ask yourself what are you comparing to? 

Long-term Growth vs Short-term Profit  

If you are comparing to what you could have gotten early this year (at the peak of the seller’s market), or what you might get as the market continues to cool, you slip into the short-term mindset, which carries a different set of risks when it comes to real estate. If you focus on your real estate as a long-term investment that can weather the short-term ups and downs, you’ll remember that the general trend in real estate values has been ever upwards. So how do you decide whether to sell or hold? 

It is healthier to assess your potential selling price against what you owe on the property, or what it is going to cost you to relocate, rather than what you could have sold it for last year or what you might fetch next year. 

In the midst of the legendary price increases we’ve been seeing, one of the challenges REALTORS® face is helping clients to have a realistic perspective about what their home may sell for. The value of a home is not what it’s worth to the seller, since sellers are often emotionally invested in their own homes and would pay more for it than others who are not. What a home may sell for means what someone is likely to pay given current market conditions. So being realistic about your needs and the market conditions will help guide your decision.

The risk to buyers right now is that if they overextend themselves, they may find themselves renewing their mortgages at a lower assessed value and be unable to afford possibly higher interest rates. If they are forced to sell, they risk ending with less than they started with. But what’s the risk to sellers?

What Are the Risks for Sellers? 

Overextending - The position you don’t want to be in right now is that of having made an offer on a new home but being unable to sell your existing one. Worst case scenario here is that your new home depreciates before you even take possession, and that your mortgage may be reassessed accordingly, meaning, your mortgage will be of higher value than the property and you’ll be on the hook for the difference. As if that’s not bad enough, you may be stuck carrying two homes at once until you sell. In this market you want to think conservatively and make sure you can handle these contingencies.

Distressed Sale - Sellers also risk selling for less than they owe. This could happen if your home is a recent purchase that has depreciated, if your debts exceed your ability to service them, or for personal reasons. If you can plan long-term with your real estate and budget in such a way as to be able to weather the short-term ups and downs, you can steer your primary investment to an increased value over the long term. 

Priced Out - Can you afford to purchase a new home? If you’re selling without a plan of where to live, you risk not being able to find somewhere else that is affordable. Affordable homes may be farther afield than previously.3 If you’re fortunate enough to be able to work remotely or are retiring soon and can relocate from a high-priced region to a lower-priced region, be clear about what “affordable” looks like today, and where you might be willing to relocate to. 

The Smart Moves in this Market Will Be: 

  • Don’t wind up in a position you can’t afford for the long term with potential interest rate increases. 
  • Don’t leave yourself with nowhere to live – the cost of rent is rising too! 
  • Be clear about your needs versus wants in a home.
  • Be knowledgeable about what you can afford and stick to it.
  • Be realistic about what the market will offer if you are selling.  

All that being said, analysts predict Canadian average home prices to continue their downward trend into 2023 and then level off while remaining above the pre-pandemic highs.2 In Desjardins’ Canadian Residential Real Estate Outlook, published June 8, 2022, Senior Director of Canadian Economics Randall Bartlett and Senior Economist Hélène Bégin conclude, “While some Canadians may lose their sleeves, we don’t expect Canadian households on the whole to lose their shirts.”2 

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In a market like this one, you can make some smart moves: sell or buy a home with FairSquare, the real estate brokerage that puts more people on your side and more money in your pocket. With commission savings for sellers, $2,000 cash back* for buyers* for buyers, and professional support every step of the way, FairSquare Group Realty is the new way home. Yours. Call 1-855-999-9740 to learn more.

*Cash back – How the Home Buying Service cash back works: FairSquare Group Realty will share with the buyer the commission it receives from the seller’s agent up to a maximum of $2,000 in cash back. No cash back if the commission received is lower than $5,000. Where available.

On December 1, 2021, Purplebricks rebranded to FairSquare Group Realty. Blog articles published before this date were created under the Purplebricks brand but remain the property of FairSquare Group Realty.

In January 2019, ComFree Commonsense Network Brokerage rebranded to Purplebricks.