Last summer, when the Salters sold the Calgary home they had been renting since moving to the quiet Caribou area of British Columbia a few years ago, the Calgary market was hot.
This year, when they decided to return to the city, the COVID-19-inspired buying spree in rural Canada increased the value of their Caribou property dramatically, while the Calgary real estate market was much cooler.
“The market slowed down significantly after the first rate hike, and Calgary was going from a crazy hot market to something more reasonable,” says Paula Salter.
Not knowing how long it would take to sell their lakefront home on a large lake, 50 kilometers east of Lake Williams in inland British Columbia, they chose to sell first and then find a new home in Alberta.
“We wanted a clean, unconditional show, so we had an advantage if we were going to a multi-view mode in Calgary,” she explains.
They were also well aware that interest rates were going up. In July, the Bank of Canada raised its benchmark rate by a full percentage point, from 1.5 per cent to 2.5 per cent – the fourth increase this year and the largest since August 1998.
“Mortgage rates were definitely a factor in wanting to sell first so we could buy quickly and be clear what to expect financially,” she says.
Inflation, interest rates and talk of a global recession are keeping the country’s real estate markets in flux, leaving buyers and sellers wondering: what is the best course of action to take in these rapidly changing times? Should they buy first? or sell?
“Certainly over the past few years, and pandemic years in particular, the market has been crazy and a lot of multiple shows have been happening across the country — people have been forced to buy first,” says Stacey Evoy, president of the Ontario Real Estate Association and a real estate broker at Royal LePage Triland Realty. In London, Ontario. “It put people in an uncomfortable position, but they knew their house would be sold.”
Most of the homes were selling for their asking price, so odds are that good sellers will have no problem finding a buyer for at least the amount they’re asking, she says.
Now, though, the market is moving toward a more traditional market, with “more choice and less competition,” she says.
It’s a more balanced market that leaves buyers more room to balance their individual financial situation and risk tolerance and decide what’s right for them — buy first or sell, she explains.
“There certainly isn’t the same upward buying pressure that has been there for the past two and a half years,” Evoy says.
“I think both buyers and sellers are being more careful and going back to where sellers need to know where they are going to land on the home listing before they can move forward with where they are going to go with their purchase.”
She notes that median prices are still much higher than they were before the pandemic, and the majority of homes are still selling above asking price.
“It’s still a good market, but it’s a little less crazy than we’ve been in the last couple of years,” she says. “I would say we are back in a healthy market, where both sellers and buyers have advantages. It is more than what we would call a fair market.”
Interest rate increases have been quick to cool demand and bring prices down from historic highs that peaked in March. Sales fell in Canada’s hottest markets, Toronto and Vancouver.
Regardless of market forces, every buyer has a unique circumstance, and the best decision about whether to buy or sell first should be made in consultation with a real estate broker and mortgage specialist, says Craig Moon, a spokesperson for the Greater Vancouver Real Estate Council.
Buyers need to fully understand their financial situation and assess the risks involved in any decision, he says.
There are risks and uncertainties for many people if they will be looking to buy a home before selling it. “They need to weigh that risk against any potential benefit,” says Mr Moon.
As the market is changing, it’s important that buyers don’t overextend, he says. He adds that for those who need money from selling their homes to buy them, the financial balance is even more important.
“It is difficult to estimate what your home will sell for perhaps than it was, say, a few months ago, as well as how long it will take to sell your home. This changing environment makes it difficult to estimate what the sale might look like and when it might happen.”
He adds that the market has fallen from record levels to more typical sales levels.
“There are more options for homebuyers to choose from and a little more time to make your decisions on the buying side,” he says. “Selling-wise, that means homes take a little bit longer to sell and you really need to look at the price you’re setting for your home as well, to make sure it’s in line with current market conditions.”