Have you been watching the newspaper headlines recently? If so, you might be wondering what will happen to the Peterborough real estate market in the face of a series of interest rate hikes. In March, the Bank of Canada announced the first increase, from .25 to .50 overnight. It was a sharp, sudden increase. For a moment, sellers worried about the value of their homes. And buyers got their hopes up that this could trigger skyrocketing home prices to drop.
However, even though the rate doubled, it remained low enough that the news barely caused a blip in the market.
More Interest Rate Hikes To Follow
The following two rate increases told a different story. For the first time in over two years, home values didn’t increase. In February, the average price for a Peterborough home reached $885,153. By the time May rolled around, the average price had fallen to $845,121.
In a shifting market, real estate is still one of the safest investments you can make. Here are a few posts from our investment series:
- A Beginner’s Complete Guide to Real Estate Investing
- How To Build Equity And Improve Home Affordability With Secondary Suites
- How To Sell An Investment Property When You Have Tenants
It seems that higher interest rates and rising inflation may have spooked many people away from buying a home. The MLS® reported 222 properties sold in Peterborough last month, a decrease of 34.3% from last year.
Should We Be Concerned?
Do these numbers spell disaster, or is the situation a little more nuanced?
A 34% drop in sales may sound devasting. But consider the fact that last Spring was unprecedented in the market with possibly the highest buyer demand in history. The decrease doesn’t mean the market is failing. It is simply moving from “scorching hot” to “hot.”
For sellers, the news is all good, even if conditions are slightly less stellar than they were a few months ago. Homes are still selling. And even though prices have fallen since February, they are still almost 20% higher than this time last year. If you’re considering putting your house on the market, now is a good time to revisit your expectations.
- Your home will likely sell, just not as fast as you think. During the market peak, many homes sold within days of being listed. Now two weeks on the market is not unusual.
- A good real estate agent is your best resource for maximizing your sale. In this slowing market, multiple offers are no longer a sure thing, and you may not get offers well above your asking price. If you want the best results, you need an experienced professional to market your home to the most targeted buyers possible.
- Preparing your home for sale is critical. You may have been able to sell your house as-is at way above your asking price a few months ago. Now, a thorough cleaning and decluttering and professional staging will go a long way towards a successful sale.
Good News/Bad News For Buyers – And Some Tips
More inventory is available, which is excellent news for buyers who have had to compete viciously over precious few listings. However, prices remain high, and buyers must realign their budgets to allow for the higher interest rates. Tips for a successful home purchase include:
- Saving for a higher down payment. The more you pay upfront, the less you will have to borrow. Your monthly payments will be lower, and you’ll pay less interest.
- Understand your financing options. As interest rates change, many banks will offer flexible repayment terms. You may choose to keep your monthly payment the same but take longer to pay off your mortgage. Or you may decide to protect from further interest rate increases by selecting a fixed-rate mortgage. A professional mortgage broker can provide you with an extensive list of options and determine the right one for your situation.
- Protect yourself with conditional offers. One of the worst results of the ultra-competitive market we were in is that so many buyers had to submit unconditional offers to have a shot at getting a home. Now, you can add the condition of a home inspection to help ensure your new house is safe and suitable.
- Work with a local real estate agent. You can browse properties on the MLS® online. But when it comes time for negotiations, an experienced agent can help you achieve the best outcome. Plus, you may have access to properties before they become publicly available.
Want to know more about buying a home in Peterborough? Check out some of our other posts:
- Relocating to Peterborough: A Case Study
- Is Now A Good Time To Buy A Cottage In The Kawarthas?
- Jeff & Katie’s Innovative Buying Approach
What Will Happen Next?
No one has a crystal ball, but all signs point to an additional cooling of the market. Significant world events can affect housing prices in Peterborough and all over Canada. Under normal circumstances, the Bank of Canada moves slowly, raising interest rates one-quarter point at a time.
But with inflation on the rise, there is a lot of pressure to bring things under control. By the time the year is over, we could be looking at rates as high as 3%.
A Return To Seasonality
Another explanation for the shift in the market could be a simple return to seasonality.
During the last two years of the pandemic, there has been only one season in real estate – full blast. However, like other industries, housing sales generally have busy and slow seasons. For example, Spring is usually the busiest time of year for real estate, with the most listings and houses sold. In the summer, things slow down as people go on vacation and enjoy Canada’s short burst of warm weather. In the Fall, things typically pick up again.
Is It Time To Buy Or Sell?
It can be challenging to get your timing right during a shifting market. Prices appear to be decreasing, so selling now could give you one last chance to earn the highest return on your investment.
Buyers, on the other hand, shouldn’t try to time the market at all. Instead, focus on your individual situation and financial stability. If you have enough for a down payment and can readily afford your monthly payments, real estate is usually a good investment. Prices may drop in the short term, but long-term values almost always rise.
Do you have concerns about buying or selling in the current market? We have been in real estate since 2003 and have seen every market condition under the sun. Reach out today, and we will answer any questions you have.
The real estate market is still pretty busy, and we’re hard at work helping homeowners in Peterborough and the surrounding area make the right moves. Check out this video to see a Day in the Life of Jeff and find out what it’s like to be a top real estate agent in Peterborough:
