Anyone who pays any attention to the real estate market understands that a change is afoot. Call it a market shit, call it a cooling down, call it whatever you like, but we are in the midst of a change in the market.
So, what is this happening?
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For the most part, a shift was expected, and to be brutally honest with you, somewhat needed. If you look at the market stats since April of 2020, we have seen a 50 percent jump with regards to pricing in Northumberland, and anyone who thought that this would continue it perpetuity is just out to lunch. What started it? A few reasons in my opinion, primarily the interest rate hike has spooked some would be buyers who simply want to wait out the market and see what happens, why buy at record high prices when you may see things settling down? Secondly, I think there is a lot of market exhaustion out there, people are tired of bidding wars, people are tired of missing out on properties, justifiably.
What does this mean for the short term?
I think the best thing we can do is look to the past to better predict the future. We have had a few different situations, much like this one, where there was either an exterior force or a change in the cost/affordability of a home, there was always a pause to reflect and see how this would change the market. Look at the 2009 financial crunch that saw homes dip for 3/4 months before roaring back stronger than ever. Look at when the foreign buyer tax was added and everyone waited for 4/5 months to see the impact it would have on the market. For me, this time is no different. When the interest rates shoot up, it justifiably made people pause. I don’t believe that it truly effects anyone’s affordability, at least not on the higher end of the market, but it does probably spook those who are buying a home and worried that the market will crash. Most in this situation will take a pause. I think that’s what we are seeing here.
What does this mean for the long term?
Well, a few things to be honest. First and foremost, I don't believe that we will continue to see 20 and 30 percent growth year over year, that was not sustainable in Toronto, its not sustainable for Northumberland. Nor should it be, the real estate market will always have ups and down, however a more balanced market is always best for all. Secondly, i can see a bit of a quiet streak over the next few months while people wrap their head around the state of the market, i do see a bit of a pick up as the fall approaches. Does that mean the same overheated market we have been use too the past 24 months? Doubtful, but never say never.
What that does mean, and i don't mean to come across 'salesy', but this genuinely is a good time to by a property. The cool down brings opportunity to get better value and maximizing purchasing power, while also getting better protection in the way of conditions and clauses that you probably could not get into an offer months ago. For the first time in a long time, we are seeing conditional sales where we did not months ago, we are seeing price changes on properties that we would not have seen months ago. The buyer has more power and leverage then they have had in the past. If you are looking to buy, this is a great opportunity.
If you are looking to sell, don't assume that all is lost, I just think you need to be very realistic about the price of your property, price it accordingly and don't expect multiple offers, don’t anticipate a quick sale. It may happen, just don’t plan on it. We may be back to the time period where it take a few weeks to sell a game, and while it can be frustrating for those who want to maximize their home value, it’s better for the market. What this means is you need to have a sales representative that knows and understands how to truly market an maximize the exposure that your home gets, maximize the eyes that it gets, be it in person, online or other.
interested in buying or selling? I’d love to chat and see how I can help you navigate the market.
One of the biggest pieces of Real Estate news we've seen in the last few weeks has been the rise of interest rates, as the bank of Canada has raised its key lending rate to 0.5 from .025 percent.
The rate hike has been speculated for some time, so its not that surprising to see. We've been heading rumours of interest rate hikes for months, with experts and others suggesting that we could see upwards of 4/5 hikes in the next 24 months.
Here's some thoughts:
Yes, this hike was expected and needed with what is happening in the world, it may very well be the first of a few. What probably will not happen is rates spike to the point that they reach the levels of 1992, where rates hit 18/19 percent for some.
A bit of context is needed here. Yes, the overnight rate is now 0.5 percent, but does anyone remember where it was pre-pandemic? IN March of 2020, the overnight rate was 1.8. There was and is no world where interest rates would stay at 0.25 as the world re-opened, and as the issues with supply chain, communities issues that are prevailing in Europe.
The last time we saw rates in the 0.25 area was 2010, fresh off the US economic collapse. On June 2010, the Bank of Canada raise the overnight rate from 0.25% to 0.50%, and hiked it two more times after that. The rate remained at 1.00% until it dropped again in 2015.
So what does this all mean? We have always seen fluctuation in the interest rates and will continue to do so, interest rates have fluctuation and worldwide events, be it a pandemic or financial collapse as we saw in 2010, the banks will react.
Through all that, we never saw rates climb to the point where it was unsustainable and unaffordable, outside of a few blips. When I bought my first home, I felt lucky that I was able to get a 4.5 rate locked in, every home I’ve purchased since then have seen that rate lower and lower. I do not anticipate 0.50 to remain, however, history educates us with regards to the future, and when there have been worldwide issues, we see reactions, but nothing that should be labeled a crisis or significantly concern home owners.
If you are on a fixed rate, your good, keep making your payments and smile. If you are on a variable rate, be in contact with our broker and monitor what their thoughts are. Honest, I can't see rates going high enough that it becomes worth locking something in, but don't take my word for it, talk to your mortgage broker.
Interested in learning more about your buying options? Lets chat
Anyone who knows me knows I’m a development nerd. I love learning about new projects coming to areas of the municipality, looking at the pros and cons of the plan and educating myself, and my clients, on how this could positively affect their standing in the market.
One area that I’ve been keeping an eye on is the old McQuillan property in Grafton, off Lakeport Rd. Originally, the plan was for 68 estate homes, the land was sold in April of 2021 to a developer who has a different plan for the land.
Introducing Lakeport Beach, a development by LandLab.
LandLab's plan for Lakeport is an ambitious one. They hope to bring 800 new homes to the approx 200 acre site, with a mix of single family homes, townhomes and cottages, while also allocating a percentage of the site to ground floor senior units. The plan for the site will see a public beach, a series of public parks, pedestrian networks thought out and as previously mentioned, a mix of housing types. Theyalso hope to offer 10 percent of the homes at 10 percent less then the average market value at the time of launch.
The idea is grand and in theory one that is needed in Northumberland, we need more housing types coming to market yesterday, however there are some legitimate concerns and questions about the plan. First and foremost, there is a genuine lack of services at the area. I believe the previous plan would have seen well and septic on each of the 68 lots, with a subdivision of 800 homes, I’m not sure that is possible. Landlabs has a plan to add a water treatment plant to the location. Secondly, transportation will be an issue. There will need to be a major investment in road and transportation networks to bring this level of development to the area. It can be argued that this area needed some of that regardless, but with this project, there is no doubt now.
Landlabs has a pretty grand plan and one that on paper, looks pretty impressive. I love the potential that the plan brings, the location is fantastic and the neighbourhood, if designed correctly, can rally add to the area and more importantly, add inventory to an area that desperately needs new home inventory. I look at the impact that Mason Homes development in Port Hope and New Amhurst in Cobourg have had on their local areas, elevating and under used pocket of land to develop it into quiet, mature neighbourhoods.
I hope that both Landlabs and the Planners can come together to find a way to make a version of this plan happen, its exciting to see and as previously mentioned, new housing is desperately needed in this area given the record levels of low inventory on the market.
If your interested in hearing more about new home developments in Northumberland, lets chat.