The average prices are in for July and guess what? The values dropped. Here is what they looked like for detached homes in June over July:
Oshawa – June/22 $886,000 July /22 $816,000 (-$70,000)
Whitby – June/22 $1,123,000 July/22 $1,097,000 (-$26,000)
Clarington – June/22 $999,500 July/22 $909,000 (-$90,500)
This should surprise no one who has been following the Bank of Canada and its aggressive attempts to control inflation by increasing mortgage rates. Here are the local impacts of the mortgage rate increases.
Oshawa, Whitby, and Clarington total sales June/22 647. July/22 369. That is a decrease of 57%.
The reasoning behind increasing rates is to in a sense, turn off the taps of “easy money” for people to borrow causing folks to stop spending money on items that are not considered essential. This is like cutting off your teen’s allowance or worse, grounding them during a summer holiday to prevent them from getting out of hand.
We have inflation running at 9% in Canada meaning if you bought a home last year and placed a mortgage on it that has a $1,000 mortgage payment, you need $1,080 in today’s dollars to pay for a debt you acquired last year at this time. What inflation does is devalue our dollar making everything more expensive. By slowing demand, the consumable market cools, prices decline, and inflation comes down. That is the theory. However, during the transition time we find ourselves in, inflation and the remedies cause panic, uncertainty and people sitting on the sidelines saving their cash to hedge against the future.
For Real Estate the questions remain; “is this a good time to buy? Is this a good time to sell?” The answer is, “it depends.” The famous Warren Buffet quote applies here – “it’s not timing the market, it’s time in the market.” This means, that no one has a crystal ball to time when the market hits bottom, or when we top out on a peak, what is important is getting in the market, or if you are a seller getting out.
For Sellers, if you have a need to sell, not a want but a true need, the time to sell is now. The trends are indicating that the values may continue to slip as the Bank of Canada is looking to increase rates. The faster you move the better off financially you will be.
For Buyers, purchasing a home now ensures that you are buying in a market that has seen a drop in values over the past 5 months. By holding off, and waiting to see if the market will slide further, you run the risk of rates rising and the benefits of a lower purchase price being offset or finding that the market has started to return to higher values with higher rates.
Over the past few years, we have seen Real Estate being treated, not in all cases but in many as a vehicle to generate profits, but we now find ourselves at a time where homes are being bought and sold for needs vs. wants. If you find yourself renting a home and paying $2,500/mth for rent and come to realize that that monthly payment would make more sense to put towards a mortgage, it’s the right time to buy. When uncertainty is ubiquitous, securing a home, with a 5-year mortgage where the payments will be fixed for the next 60 months takes a considerable amount of fear out of the future.
For many, this is an ideal time to buy a home, and for many Sellers, it makes sense to place a sold sign on the lawn. Certainty can be defined as cash in the bank from the sale of a home, or mortgage payments fixed for a 5 years period. Certainty reduces stress.
If you feel stressed about buying a home or selling your current property and want to talk about your concerns, I can be reached at lindsay@buyselllove.ca