The Fall
TD Bank reported home prices could decrease 20-25% from the highs seen earlier this year—yet another portrayal of the sky falling. No one has a crystal ball, but eventually it will reach an equilibrium as with any cycle, and a wait and see approach could be followed by an echo blip of activity. Buying into a dip is better than buying on the other side of a dip. Taking the time to assess all options is, however, warranted given how rapidly the market is transitioning. Canada's immigration targets are increasing, set to welcome about 447,000 permanent residents in 2023 and 451,000 in 2024. The next wave sure to add more fuel to the hot housing market. Interest rates are already up 225bps from the lows, with another announcement of a 75bps increase expected next Wednesday September 7th. RBC said interest-rate hikes may trigger higher monthly payments for about 80,000 customers with variable-rate mortgages. CIBC is calling for the Bank of Canada to put rate hikes on pause after September's announcement, suspecting a "narrative shift" is coming.
I recently attended a mastermind session with a mentor, founder of The Nature of Real Estate, where a handful of real estate agents from across Canada shared their perspectives on different scenarios currently faced in the profession. The focus was on dealmaking and how to win in negotiations despite erratic market activity. Managing expectations versus reality from a boots on the ground perspective. Sellers that may be holding out and staying firm on their price, likely will see the first offer on the table as the highest and best, with each passing month kicking the can down the road. When it comes to value, instead of a top down approach, it's encouraged to view it from the initial purchase price up. To illustrate with a case study, this recently sold condo in Coquitlam almost doubled in value over a period of ten years, with hardly any upgrades. Conversely, the buyer got in at a discount given today's market. As the saying goes, particularly when it comes to buying a home you love:
"It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do." – John Ruskin