After losing out on a house in a bidding war in 2016, Sandi Hamilton and her husband watched housing prices in the Toronto neighbourhood where they were renting soar higher and higher.
“There was high competition. Investors were looking. You couldn’t put conditions on your offer and even houses that needed fixing up were going for crazy amounts,” says Hamilton, a stay-at-home mom.
In spring 2017, after a year of looking, they saw two small semi-detached homes on their street sell for $1.6 million. They decided to take a break. “It was getting so bad, it had to come down,” she says.
“With all the uncertainty over an unpredictable American government and policymakers instituting policy that has slowed the market, it is difficult to pick the right time to buy or sell."
She was right: Prices started to soften soon after they stopped their search as the real estate market slowed across Canada. According to the Toronto Real Estate Board, house sales fell by 22 percent year-over-year in May while prices were down 6.6 percent. Across Canada, sales volumes fell by 16.2 percent in May, according to the Canadian Real Estate Association.
While prices rebounded in June, there’s still a lot of uncertainty as to where the market may be headed next. Stricter mortgage rules, foreign buyers’ taxes in B.C. and Ontario and rising interest rates have helped to cool the housing market and that’s caused people across the country to think twice about whether to buy or sell.
“With all the uncertainty over an unpredictable American government and policymakers instituting policy that has slowed the market, it is difficult to pick the right time to buy or sell,” says Phil Soper, CEO of Royal Lepage. “Buyers and sellers have both been on the sidelines.”
So what’s a buyer or seller to do?
Size up trends
Buyers and sellers, along with their agents, should be looking at local market trends as well as forecasts and think about where things might go next. According to a July 2018 report from Royal Lepage, those hoping to snag a deal in Toronto or Vancouver may be too late. “The market appears to have bottomed out,” says Soper, adding that some neighbourhoods will return to “uncomfortably high” prices by the fall. It’s not the same everywhere. He notes that prices in Edmonton and Regina continue to fall, while Halifax and Montreal continue to have strong markets. If you’re in a region where prices are on the uptick, now might be a good time to buy, before prices rise even further.
If you need to buy a house, waiting until the market crashes, if it ever does, doesn’t make sense. However, there are times during the year where buyers can get a good deal and sellers can unload their homes for more. For the former, that’s during cold winters and hot summers, for the latter it’s the spring and fall, when people tend to be more ready for change. “The best time to buy is when others are not,” says Soper. Selection is more sparse in the winter and summer, but it’s still possible to find a great place at a cheaper price.
Sell because you want to
It can be tempting to think of real estate as the type of investment you can look to for high returns, but the double digit gains we’ve seen of late are a more recent phenomenon. “Typically real estate has been about a five percent return over time,” says Soper. The rapid gains have caused sellers to think more about making the most they can off their house but, he says, it’s better to sell when you need to, even if the price isn’t as high as you’d like. “Most people move when it works for their family,” says Soper.
Downsizing used to mean selling your suburban home for a good price and then buying a less expensive condo, but that’s getting more difficult to do these days. Condo prices are still rising, while sales of suburban homes in larger urban centres have seen steep drops in the last year, says Soper. If your home dropped in price over last year, you could wait for those prices to go up before selling, but in terms of buying a condo, “Waiting is not going to make those prices any lower,” says Soper.
If you do want a condo, look in areas where land values are cheaper, such as in the suburbs and in smaller cities, says Soper. Developers are building more condos outside the downtown core, he says.
As for Hamilton, her wait for the perfect home continues. She’s seen prices come down, but they’re still higher than when they started looking two years ago and for the amount of money they would have to spend, she wants the purchase to be just right. “I would like to own a house,” she says, “but I don’t want to make an emotional decision about it.”