As we approach the end of this year, and the beginning of the next, prospective property buyers find themselves in a state of anticipation, and contemplation.
The eagerness to seize opportunities has butt up against mounting frustrations. Given the dramatic surge in interest rates, one might have logically anticipated a corresponding drop in prices, tilting the scales in favour of buyers. Unfortunately, these potential buyers have discovered that their patience has been tested beyond their expectations. In many cases, they have reluctantly abandoned their hopes of securing properties at a drastically adjusted price, grudgingly accepting the current market rates.
Let’s decipher the current state of affairs.
Even though overall demand has decreased due to interest rate hikes, the supply of properties has also decreased because sellers are reluctant to participate in the market.
This, coupled with the dearth of new developments, has increased property prices, and maintained overall “market stability”, by funneling demand toward existing property stock.
Notably, we can see the median property price, encompassing various property types, such as single-family homes, condos, rental properties, commercial spaces, and land, has exhibited resilience. It has dipped only slightly, from $570,000 in 2022 to $567,000 in 2023, for the Island of Montréal, as depicted in the accompanying graph showcasing median prices.
For prospective buyers navigating this intricate landscape, it is crucial to distinguish between new listings entering the market, and the total inventory of available properties.
Most buyers remain fixated on new listings, often hopeful that the next one will align with their desires. Given fewer come on the market than anticipated, they have the impression that there are no homes available on the market. However, this singular focus obscures the reality from an all-time low in new listings, this year, to the all-time high in availability, it’s a little bit of an odd concept to wrap our heads around. How can there be fewer listings, but at the same time an all-time high for inventory building up each month.
Simply put, although there are fewer homes coming to the market this year compared to last year, there are still more new homes coming on than homes being sold. This is creating a surplus, accumulating each month, and increasing the total number of available properties. As of the month of October, there are over 13,000 available properties on the market (all categories included), for the Island of Montréal, as illustrated in the availability graph, which is much more than we have seen for years.
This situation poses a conundrum: What if sellers return to the market with renewed enthusiasm, causing a surge in new listings or at the very least a return to normal listing supply? This would in fact create an even larger surplus and sky rocking inventory. Or: What if the buying conditions become even more stringent, reducing the amount of properties being sold every month, again creating more surplus? Both scenarios would intensify the existing inventory, and exert downward pressure on prices.
So, will the upcoming fall and spring seasons herald a favourable time for buyers?
Well, it might just be!
Keep in mind on the other hand: If rates were to decrease; or, if fewer and fewer sellers list their homes, reducing the total amount of availability, the hope for lowering prices could soon become a faint memory in the minds of buyers, amidst a growing and expanding real estate market.
Let’s wait and see how this one plays out; but, of course, we will keep you posted as always.