A couple of weeks ago, the Bank of Canada dropped their latest announcement – a new increase to the interest rate by a full percentage point overnight. This is the steepest hike since 1998, and it’s front of mind to anyone looking to buy or sell a house in Canada. The previous hikes are already affecting the country, with falling prices and homes taking longer to sell. What a dramatic shift from the red-hot market we experienced a few short months ago! It just proves how unpredictable the market can be.
In February, average housing prices in Peterborough reached an all-time high of $885,153. By the time June rolled around, those prices had come down to $751,522, about a 15% decrease. And we don’t yet know what the effects of the latest interest rate increase will be. Our best guess is that the market will continue to become more balanced, and prices will likely see even more correction.
Do you want to know more about the real estate market in Peterborough? Here are some insights that might help:
- Are We On The Cusp Of A Buyer’s Market?
- How Will Rising Interest Rates Affect Peterborough?
- Relocating To Peterborough: A Case Study
Are These Changes Good Or Bad?
That depends on your perspective. Whenever the market shifts in any direction, there are some people who come out ahead and some who take a hit. For example, this change will likely impact many first-time buyers already struggling with high prices. Although housing values are down from the winter, the prices are still out of reach for many. It can be challenging to save enough for a down payment when you have rent to pay every month.
High prices and rising interest may be daunting for many first-time buyers, but all is not lost. Check out this Guide to Government First Time Buyer Programs
Let’s take a look at who else might be affected by this changing market.
Sellers Who Aren’t Buying
Most people who sell a property do so in the hopes of buying a new one soon after. Some are looking to move up to a larger house with a backyard. Others want to downsize into something smaller and with less maintenance required, perhaps a townhouse or condo.
If you are selling without buying, then there are no two ways around it – you would have made more in the wintertime. But there’s no sense kicking yourself over what might have been, and it is impossible to time the market precisely. Here’s a better way to look at it: How much did you sell your house for versus what you originally paid?
In 2019, it made headlines when the price of a house in Peterborough “jumped” to $416,011. These days, buyers can only dream of those prices! If you bought then and sold now, you would pocket approximately $335,000. That’s a healthy return on investment after only three years.
Upsizers And Downsizers
Current homeowners who intend on selling and then buying are in the best position of all. Their equity in their home insulates them from the worst effects of the interest rate hikes. If prices go up, great! You can sell your house for more.
If prices go down, there’s no need to lose sleep over lost profits. You’ll gain it all back because your next home will also cost less. It’s a stark contrast from when you could sell your home, and prices would skyrocket a week after your closing date!
Short Term Vs Long Term Investors
Buying without selling is a challenge in any market unless you have access to significant funds. As interest rates go up and regulations tighten, some investors may find it challenging to add to their portfolios.
For example, house flippers and short-term investors may struggle to turn a profit, especially when you consider inflation and the rising cost of materials and labour.
However, if you have equity in your current home, you can borrow against it, often at a lower interest rate than a traditional mortgage.
If you are able, now is the perfect time to invest for the long term. Prices are lower than they’ve been for months, but housing values always grow over time. And fewer people buying means more people are renting, which makes finding a tenant for your income property much easier than in a full-on buyer’s market.
Are you thinking of adding to your investment portfolio? Real estate is an excellent way to do it. These resources can help:
How Sellers Can Succeed As The Market Shifts
For homeowners, it’s more critical than ever to do everything possible to maximize your sale so that you are empowered for your next step. This is no time for shortcuts! A local real estate agent with experience in shifting markets can guide you and help you get the best results. Here’s a snapshot of what you can expect from the process:
- Start with a home appraisal. Overpricing your home is the worst mistake you can make during uncertain times. Buyers won’t try to negotiate; they will simply pass you by. An attractive price point will make people want to know more about your listing.
- Prepare your home for maximum impact. Cleaning, prepping, and staging will help buyers fall in love the moment they step inside.
- Market your listing effectively. Listing on the MLS® is only a start. You want your listing to catch the attention of qualified buyers everywhere.
- Troubleshoot and negotiate. In a changing market, buyers can get cold feet, and transactions can fall through. A good agent with negotiating skills can ensure everyone feels comfortable and that everything goes according to plan.
How To Buy In A Changing Market
The good news for buyers is that prices have gone down, and more options are available now. You can take your time looking at homes to ensure you’re picking the right one. And you can protect yourself by using conditional offers, something that was unthinkable a few months ago.
The bad news is that higher interest rates don’t just mean higher monthly payments. They can make it harder to qualify for a loan in the first place as the stress test becomes more stringent. The bank doesn’t assess you at the current rate, but looks at how you will be able to manage in the worst possible scenario.
Your best bet is to talk to a mortgage expert and get to know all of your options. You should also get the assistance of a local real estate agent to represent you as a buyer. It costs you nothing, and a well-connected agent may have access to hard-to-find listings that might be perfect for you.
Do you have questions about buying or selling in Peterborough during a shifting market? You can reach out to us right here, and we will be happy to point you in the right direction.
