It isn’t a secret anymore. The real estate market has softened, and nowhere is feeling the effects like the GTA. At the height of the pandemic, housing prices soared to an unprecedented $1.3 million. If you wanted to upgrade to a larger, fully detached home, you’d be looking closer to the $2 million mark. Buying a house had never been more challenging, even for those with access to significant funds. Even if the record high prices weren’t an obstacle, the fierce competition was.
For buyers, the recent market slowdown is a breath of fresh air. The cost of houses has dropped. Even more importantly, more listings are available, and there is much less competition to contend with. However, there are essential things to consider when buying during a shifting market and common mistakes you’ll want to watch out for.
Trying to Time the Market
In many ways, the real estate market is the result of a herd mentality. During the pandemic, many people genuinely wanted to upgrade to more space. For them, the time was right, regardless of outside circumstances. However, many others followed suit, causing the market to soar out of control. Now that the boom is over, some new homeowners are feeling the sting of buyer’s remorse.
Now, we’re seeing the opposite effect. When the Bank of Canada started raising interest rates to combat inflation, buyers began to drop out of the market. Suddenly, houses stayed on the market for longer, and prices began to fall.
The shift caused a new trend, with vast pools of potential buyers holding back to see how low prices would go. However, it’s nearly impossible to predict when prices will bottom out. Housing values dropped steadily every month until July when the average cost of a home reached $1.074,754.
Not Anticipating How Quickly the Market can Change
In August, prices increased slightly over July to $1,079,500. It’s the first month-over-month increase since February. It could be the start of a new trend as the market recovers.
Or it could be a temporary blip, and prices could fall again in September. In any case, prices are still relatively low. If the time is right for you, the market is still in your favour. It’s always best to act on your own accord rather than following what everyone else is doing.
Do you want even more help to find your perfect new home in Etobicoke? Check out some of our other informative posts:
- Are Prices in Etobicoke Going Down?
- Everything You Need To Know About Buying A Home in Humber Valley
- Etobicoke Real Estate: Then and Now
Overbidding for a House
The real estate market in early 2022 was so overheated that it remained hectic even as conditions started to cool. Potential buyers still found themselves up against multiple offers and even the occasional bidding war.
Old habits die hard, and the temptation to overbid is still there, even now that we’re in a far more balanced market. As a buyer, obtaining the best price possible is important, especially with higher interest rates driving up your monthly mortgage payments.
Underbidding for a House
On the flip side, many buyers are trying to underbid to try to purchase a house for less than it’s worth. That’s why it’s essential to understand the market we are in. Sellers are not desperate, even though housing values have dipped.
Buyers had next to no negotiation power earlier in the year. You are in a better position now, but we are still not in a buyer’s market, especially not in highly desirable areas like Etobicoke. This is a balanced market, and buyers and sellers are more or less on even ground.
If you lowball your offer, the seller will reject it outright. If that happens, you’re back to square one.
Buying a home can be challenging, especially for first-time buyers. Why not download our guide right here?
Not Understanding How Conditions Work
Everyone who has ever bought or sold has a basic idea of how conditional offers work. A buyer agrees to purchase the house so long as certain conditions are met. Some of the most common conditions include:
- Conditional upon home inspection
- Conditional upon sale of current home
- Conditional upon financing
You can even submit an offer conditional upon the seller including furniture and other chattels in the deal. The problem arises when you over or underestimate how much bargaining power you have.
During the housing boom, a seller would generally reject your offer if you had any conditions at all. With the recent slowdown, things are changing. We recommend using any conditions to protect you from buying a house with structural issues or from getting in over your head financially. However, if you include too many contingencies, you may lose the home you love.
Listening to the Media
Nothing sells like panic, and if you listen to some news headlines, Canada is facing financial disaster, and the real estate market is tanking. Doom and gloom often go viral because they’re based on a hint of truth.
Yes, we are facing some challenges.
Inflation is high, and housing affordability is a tough issue for many people. However, our economy remains strong, with very low unemployment. And the real estate market isn’t even close to crashing. A market correction has been long overdue. Even though prices have come down, they are still higher than last year.
Not Using an Experienced Real Estate Agent
All real estate agents are not equal. Some offer far more services than others and will work with you to determine the best house for you while working their extensive network to come up with hard-to-find listings. Others will simply scan the MLS® listings to find something within your budget.
Most of all, some real estate agents have experience working in every type of market imaginable. In contrast, others only got their license during the boom of the last two years.
If you want someone who will go to bat for you, look for an experienced professional who has dealt successfully in all situations.
How do you find the right real estate agent to help with your purchase? Here are some ideas on what to look for.
Not Using a Real Estate Agent at All
As a buyer, you have nothing to lose by working with a local expert to help you find the right house for you. The market changes quickly, and it’s vital to have expert guidance to ensure your success. The best part? It is the seller who pays any commissions, so it won’t cost you anything out of your pocket.
Thompson Sells is a full-service Realtor with over 30 years of experience helping buyers find the right home regardless of market conditions. Do you have questions about how to get started? Reach out to us here or call 416-236-1241.