Slowing housing markets in many parts of Canada are pushing some home sellers to make hard-fought concessions on price — or delay their plans to sell until next year — in the wake of higher rates.
Real estate experts who spoke to Global News say patience and price flexibility are key to landing a sale in today’s market, and that waiting until spring in hopes of a better deal is far from a sure thing.
October sales figures from the Canadian Real Estate Association (CREA) released this week showed a “sizable decline” in activity in most of the country’s biggest markets.
Sales volumes dropped 5.6 per cent from September, according to CREA, with chair Larry Cerqua saying that buyers might’ve entered an early “hibernation” as higher interest rates limit buying power across the country.
Lorna Willis, an agent with Re/Max Finest Realty in Kingston, Ont., says that the number of homes sold in that city was down nine per cent year over year in October, with average prices down 5.3 per cent annually.
The main thing that’s changed in the region is how long it takes to sell a home, according to Willis. While the average days on market in Kingston now stands at 24 days, she says it can take between three and six months to land a sale now.
CREA noted that the national sales-to-new listings ratio hit a 10-year low of 49.5 per cent in October.
“It’s definitely been a shock for sellers, what’s changed,” Willis tells Global News.
The Greater Vancouver Area is also experiencing a slowdown, says Realtor Elliott Chun at The Partners Real Estate.
While sales volumes in the market rose both month over month and year over year in October, he notes the market is still almost 30 per cent below the 10-year average for the month.
The number of buyers in the market has “tapered off” since the spring and summer, he says, and multiple-offer situations are increasingly rare and reserved for top-tier homes.
Not every market is facing a deep chill: sales in Calgary are still elevated, notes Hanif Bayat, CEO of the financial analysis platform WOWA.ca. Calgary’s housing supply is still tight and sales of relatively affordable condos are boosting activity in the city, according to the local real estate board.
But Bayat tells Global News that sellers in Ontario and B.C. are facing steep challenges and longer waits trying to sell their homes in the higher interest rate environment. Buyers here are facing steeper affordability challenges amid typically elevated home prices and higher cost of living.
Fewer buyers are able to qualify for mortgages at today’s high rates, at the same time as sellers with mortgage renewals coming up are struggling to meet their monthly payments, Bayat says.
Sellers feeling the stress — particularly investors whose income from rental units is no longer covering their mortgages — are trying to offload properties when demand has been stifled by higher borrowing costs, he says.
“We have more sellers and less buyers. And typically that means that it’s hard to sell,” Bayat says.
Sellers have to be ‘sharp’ on price
Despite signs that some jurisdictions are shifting into — or may already be in — a buyers’ market, Bayat says sellers are not “adjusting their price as fast.”
In Ontario, he says many sellers are still accustomed to the market of a year or even six months ago when they held more negotiating power in the face of fervent buyer demand.
“The sellers are not used to this environment … they don’t know that they don’t have that power that they had before,” he says.
Chun in Vancouver also says there’s a feeling of “FOMO” out there in the market — a seller’s fear that they don’t want to miss out on the price their neighbour got a month ago. He cautions that having this mindset can lead to a “stale listing” with 30 days or more on market without significant traffic.
“Putting the prices of yesterday aside, you can only control what’s in front of us, and that’s the current market condition and what a buyer’s going to pay,” he says.
Chun has recently found some sellers willing to negotiate — he cites one property listed close to $1.4 million where the sellers dropped their asking point to $1.25 million before his buyers made an offer and were able to haggle the price even a little lower.
The reason for selling has a big impact on whether a seller is willing to negotiate on price, he says.
“I think the clock is ticking for a lot of sellers out there, especially investors,” he says.
In Kingston, Willis says homes are selling at an average of 97 per cent of asking price. That’s “low” by historical standards, she says, and indicates that there’s room for buyers to negotiate.
Sellers have to be “sharp” on pricing, she says, because buyers are not willing to overpay in the current market.
For those who have a particular dollar figure in mind that they need to hit, Willis advises “patience.” That’s also affected the order of operations for many sellers, she adds.
“During the pandemic, our advice was, your home will sell in a hot minute, so go find the one you want to buy because they’re more rare,” Willis says. “Now it’s flipped that we don’t know how long it’s going to take to sell your home, but there are a lot of homes on the market.”
Both Willis and Chun says conditions for financing and inspections are commonplace in the market, as are conditions for the client’s home to sell first before the deal closes. Chun notes this can create a chain of conditional offers on the sale of a single home as buyers seek to get their own home offloaded before closing.
Will spring be better for sellers?
When a client comes to Willis to sell their Kingston home, the first question she asks them is: why do you need to sell?
If someone isn’t on a deadline and can wait to get the price they want, she’s recommending they wait “until the market’s more friendly for them.”
Willis expects that the typically busier spring market could coincide with signs that the Bank of Canada’s interest rates could be set to fall. While the central bank has warned that its policy rate might still need to rise further to tame inflation, some economists have forecast rate cuts could begin by mid-2024.
When buyers have that “stability,” Willis expects demand will return to the market, which could in turn drive prices higher again.
While many buyers are boxed out of the market at the moment because of those higher rates, both Chun and Willis say buyers who are able to qualify today have their pick of listings and can negotiate solid deals for themselves.
Sellers may be anxious if their home has been sitting on the market for a while, Chun says, and may be grateful to get a sale of any kind before the holiday rush and the new year turns over.
“Some of the best deals I’ve secured for buyers have been from sellers that are just really just ready to go and happy to receive offers when the market is quieter,” he says.
Bayat is less convinced that sellers will be able to get better prices in the spring.
Canada’s economy has shown clear signs of cooling in recent months. Bayat says that if cracks continue to form in the labour market and the unemployment rate rises, buyers experiencing a loss of income might be pushed back to the sidelines in the spring.
Rising mortgage stress could also drive more sellers into the market, he says — adding more supply to a dwindling set of buyers and driving sale prices further down.
“I think the smart thing is to accept the reality that the market has changed,” Bayat says, arguing homeowners thinking about selling ought to do so “sooner than later.”
Chun, too, is wary of banking on higher prices in the spring. Real estate prices are shaped by a lot of forces outside the control of buyers and sellers, so better to work around whatever schedule is right for your household, he argues.
“Timing the market is really difficult and a lot of people get it wrong and I try to avoid that,” he says.
“I tell people, go do what’s best for you. And if that day is now, let’s do it.”
— with files from Global News’s Nivrita Ganguly