Back in the Spring, the hottest topic was the real estate market and how much prices were going up. Once again real estate is a hot topic but this time for the opposite reason – how far is the market going to go down? We all knew it was coming and the writing was on the wall when prices were going up by 5-10% a month in January, February and March. We knew prices were unsustainable and a correction was imminent but unfortunately there are a lot of people who were caught in the shift and are in a tough position.
In the Spring I would meet with sellers to evaluate their homes. We would list it at a high price and sell even higher with a record number of showings and a firm sale in a matter of days. Sellers were happy. Now it’s a totally different game. The toughest part is accurately evaluating a home and convincing the sellers that they’re not going to sell for as much as the Jones’ in the same house down the road sold for just a few months ago. It’s heart breaking giving them the bad news but as the media is reporting the declines more and more, reality is sinking in. For example, single car detached 36’ Mattamy homes were selling in the 800’s to even low 900’s depending on size and upgrades in the Spring and now they’ve dropped by at least $100,000.
One thing that has affected the market and will continue to put downward pressure on the market is deals falling through. There are a few possibilities here – Buyer bought at the peak, can’t sell for the amount they were anticipating and literally can no longer afford their purchase. They walk away from their deposit and the home goes back on the market. Another scenario is when a buyer three months earlier sells their home firm then a couple of days before closing, the bank appraises the home way less than the purchase price. They refuse to finance the mortgage unless the buyer pays the difference. The buyer solicits money from family to try and close and if they’re unsuccessful, again they walk away and the home goes back on the market. This creates a domino effect as most of the sellers have already bought their next home, putting them in a high pressure situation too. It’ll take a while for this to filter through the market and in my opinion, we’ll still see downward pressure on pricing for at least 6 months.
So what do you do if you’re considering selling? Well if you’ve bought a house from a builder, are getting divorced, or have a job location change, you really have no choice. I sold through the recession back in 2008, so I’ve seen this before and here’s the best strategy to take. Don’t look at what your neighbours are asking, look at what your neighbours have SOLD for. In the Spring, the market was going up weekly. In contrast, it is now going down weekly. So find a similar sale in the past week to two weeks and price LOWER than that sale. Trust me on this! It’s a tough pill to swallow but in 6 months when the house you just sold is worth less you’ll thank me. Oh yeah, if you bought at the peak my advice to you is don’t move! Stay there, enjoy your new home and don’t think about real estate for 5 years. You’ll do fine.
Check out my blog www.straightalkonrealestate.com – Cliff Barron