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The real estate market can feel unpredictable to buyers and sellers, but the experts watching the trends keep a fairly close eye on what’s coming down the pipeline. Based on ratios, data, and trends, they can determine whether the Canadian real estate market is heading into a buyers’, sellers’, or balanced market.
For example, a balanced market is one where the ratio of sales to new listings is a healthy mix, in other words, supply is meeting demand. When the ratio drops (more homes for sale, less buyers), it’s generally referred to as a buyers’ market and buyers usually hold the upper hand in terms of bargaining power. Buyers and their REALTORS® are then able to negotiate, and don’t need to feel like they’re wedged into an uncomfortable compromise when looking for their next property.
Yet when the opposite happens (less homes for sale, more buyers), you can end up with what’s known as a sellers’ market.’ In a sellers’ market, there may be a shortage of homes available, and it can put sellers back in the driver’s seat. So what does that mean for those looking to make a purchase during a sellers’ market?
Timing is everything
According to the latest statistics from the Canadian Real Estate Association (CREA), the end of 2023 was on par with some of the busier summer months in terms of the market, but 2024 might paint a different picture. The number of properties expected to change hands in 2024 is expected to rise 10% over last year’s figures, with British Columbia and Ontario starting to rebound from low sales volumes. For now, the future of real estate markets will still largely depend on what happens to those two key numbers: the inflation and interest rates.
For context, national months of inventory as reported by CREA showed that between summer 2020 and spring 2022, there was a strong sellers’ market (with less than two months of inventory available in some months) as interest rates dipped low enough to make mortgages accessible to a new wave of buyers. However, market balance is showing signs of changing nationwide with more than four months’ worth of inventory available by the fall of 2023.
(Months of inventory is how long it would take to sell all the homes listed for sale in a current market, based on the area’s rate of sales activity.)
For buyers jumping into a sellers’ market, the competition can certainly prove challenging. A sellers’ market puts the seller in control, and that can mean more of an uphill battle for those who need to make a purchase in short order.
“Buyers may decide to make more attractive offers when involved in a multiple-offer scenario, which could include putting in an offer with little to no conditions, or at a much higher price than the list price,” said Ryan Biln, an economist with CREA.
However, Biln also notes that much like so many things in life, the market is cyclical. Biln said this is due to any number of factors, such as “interest rates, labour markets, population growth, the availability of supply, attractiveness of a certain region, and other factors.” Different areas will also see different trends, so a sellers’ market in one location may happen at the same time as a buyers’ market in another, and both are bound to see the tides turn in due course.
A little patience goes a long way
While we think of real estate markets as being a special outlier, “it’s really very much like any other consumer product,” says Jayson Pohl, a REALTOR® and owner and broker of record at Lincoln Realty Ltd. in Durham Region, with 17 years of real estate experience. There are going to be peaks and valleys, and times when demand is high and times when demand is low. Pohl advises keeping that sense of perspective can be helpful when dealing with a challenging time.
Pohl notes he follows the trends and statistics, and regularly advises both buyers and sellers to be patient, and not get swept up in the fever of the market.
“When I work with buyers in a sellers’ market, I stress to them that I give them limits,” he explains. “I don’t want to see them get caught up in the auction fever when it comes to multiple offers on a property.”
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Ultimately, if a sellers’ market is making buying too challenging, and you’re not in any immediate rush, then waiting out the trend may soon lead to more favourable conditions. Keen-eyed buyers can keep monitoring trends and economic conditions so they know when the tides may be turning. Having a sense of the local market, and current inventory, will also provide insight into what may be well within reach.
Of course, no buyer needs to go on this journey alone. Working with a local REALTOR® means you have an expert on hand who monitors trends and economic conditions daily, and who has your best interests at heart. The right REALTOR® can help advise you on timing based on your needs and budget, and maybe help expose you to properties you never even considered. The buying journey can be overwhelming, but there’s no need to go it alone!
