Home sales are down due to the Bank of Canada's rate hikes. The herd of investors are flocking to Calgary and Montreal’s markets to invest where prices are low enough for these rates to make sense to their bottom line. The GTA market is showing signs of cooling with homes staying longer on the market, and bidding war frenzies coming to a halt. Here’s why:
LOWER DEMAND, HIGH-INTEREST RATES.🔺
Increasing interest rates means higher borrowing costs. But how does this cause the market to cool? Well:
homeowners are forced to either handle an increased mortgage payment or sell
buyers face higher interest rates on their mortgage which reduces the $ amount of home they can afford. With more homes on the market and fewer buyers willing to buy, this pushes the price down slowly but surely.
Investors like to invest in Real Estate when they can profit or at least break-even
WHAT TO EXPECT & STAYING READY.
🏘Sellers:
Your home may sit on the market for a longer period. The buyer demand has cooled; there aren’t as many buyers as earlier in the year (Jan/Feb). The buyers who were losing bidding wars now have a window to win, however, keep in mind that their budget is also shrinking each time the interest rate increases .50 basis points. Pricing your home correctly is the key to driving the traffic of buyers. Price right the first time and avoid having to re-list at a reduced amount. Put your best foot forward - don’t cut corners. If you need to reno, focus on upgrading the kitchen, living room and/or bathrooms. A fresh coat of paint can go a long way.
🏡Buyers:
You benefit the most from this market. You'll see less “taking offer dates” and more “taking offers anytime”! There's more opportunity to negotiate and fewer buyers to compete against. The transition into this new potential buyers market is an adjustment for sellers who may not want to accept just yet that the market has changed. Always have your pre-approval and down payment ready to make a move.
👩🏽💻What’s Next:
With the interest rate increases, the real estate market is seeing a higher supply of homes and a noticeable decrease in home prices in the GTA. Remember a .50 basis points increase translates into roughly $25 more per month per $100,000 of debt, based on a 25-year amortization. The economists are expecting a further .50 to .75 basis points rate hike in July.
Call me 📲 I'm working.
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