UNDERSTANDING THE MARKET

The housing market fluctuates, experiencing both strong and weak periods.  History has shown, however, that the market will rise in the long run.  Predicting how the market will go is nearly impossible, and if you wait around forever for the market to be perfect, you’ll waste a lot of potential investment money on rent!

Having said this, chances are you still want to know how the market works, because there are periods when it’s best to be a buyer
(and conversely) times when it’s best to be a seller.  You can see what the current market is like by asking your real estate agent how the current market compares to the past 12 months.

A good overall economy naturally produces a stronger market with more people looking to buy.  A strong economy also produces more construction and housing developments, opening the market to more new homes.

BUYER’S MARKET

Ideally, the best time to buy is during a buyer’s market, when many sellers want to sell but few buyers are looking to buy.  Homes take longer to sell, so buyers can take more time to make decisions.  To sell a home in this market, sellers have to list at aggressively competitive prices, and sometimes even offer other incentives.  If you have to sell your home during a buyer’s market, the good news is that you’re able to take advantage of these same conditions when you go to buy a home for yourself!

SELLER’S MARKET

The opposite of a buyer’s market is a seller’s market.  Few homes are on the market, but buyers are plentiful, which results in fast home sales at prices close to, or even above, the listing prices.  Some homes sell even before they’re listed.  Because of the rise in sales, some owners may decide to take on selling their homes themselves.  In a seller’s market, buyers have less negotiating power and less time to decide, and may even find themselves in a bidding war.  So if you’re buying in a seller’s market, be prepared to make quick decisions.  Have all your homework done and your financing arranged.

SEASONAL INFLUENCES

Winter in Edmonton is notorious for being cold and unpleasant.  People don’t like to venture out much, unless it’s for necessities like groceries or to go to hockey games or do an activity like skiing.  Besides, who wants to look for a home when they’re busy buying gifts for the holiday season?  The winter months also tend to be slower for the real estate market because a lot of people with children don’t like to move during the school year.  A lot of properties aren’t on the market simply because sellers know their homes look best in the summer with the flowers, the leaves, and the sunshine.  This means there’s a good possibility that the homes on the market at this inhospitable time of year must be sold, so you may find a good bargain.  You just have to deal with snowdrifts and chilly temperatures on moving day.

INTEREST RATES

If you need a mortgage to purchase your home, you’ll find that interest rates make a big difference in how much home you can afford.  When interest rates are high, fewer buyers tend to be in the market for a new home.  You can see the logic:

A 4.5% interest rate on a $200 000 mortgage loan will cost you approximately $9 000 in interest in one year, while the same $200 000 loan at a 7% interest rate will cost you about $14 000 in interest!

Different types of mortgages can increase or decrease your interest rate from what banks consider the current standard.

GOVERNMENT PROGRAMS AND INCENTIVES

Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation, of the Government of Canada.

One of the main functions of the CMHC is to manage the federal Mortgage Insurance Fund (MIF), to provide protection to banks reluctant to enter the mortgage lending market.

Today its main function is managing providing insurance for residential mortgage loans to Canadian home buyers.  This insurance protects mortgage lenders against mortgage defaults on mortgages for which insurance has been purchased (mandatory on loans with less than 20% down although lenders may require it on loans with more than 20% equity if they perceive additional risk of default).  Besides mortgage insurance, the agency provides financing to housing projects and renovations, does housing market analysis and funds research into housing design and technologies along with the National Research Council.

THE ECONOMY

The overall health of the economy is probably the most influential factor.  Broadly speaking, when the economy is sluggish, so is real estate.  This is generally measured by economic indicators such as employment rate, manufacturing activity, the prices of goods and services and so on.

People need to feel safe and secure in there current and future financial positioning.  Job stability, pay increases, and minimal inflation rates help buyer’s feel confident in their purchasing decision.

Ultimately, it’s both buyer’s and seller’s economic perception that drives the influence of today’s real estate market.

IS IT THE RIGHT TIME TO SELL?

This is a personal question only you can answer.

Selling your home is one of life’s major milestones.  You can do this successfully and have fun along the way if you do a little homework and make good home selling decisions.

Doing well allows you to change your living conditions, and gives you a fresh start with your finances and housing overhead.