Are you considering putting your house up for sale in July? Looking at all the necessary information before you make a big decision like that is critical.
Understanding The Housing Market
The housing market in Ontario and the rest of Canada is cyclical. Whether we are in a buyer’s or seller’s market depends on several factors like interest rates, economic conditions, and consumer confidence.
These factors affect the inventory of homes on the market. That in turn creates either a shortage or surplus in housing.
- A seller’s market occurs when the demand for homes has increased so prices usually go higher. This can also mean there will be multiple offers and properties sell quickly. In a seller’s market, the people listing their homes have the most negotiating power. They are able to reject features like conditional offers.
- A buyer’s market is characterized by an increase in supply which means lower sale prices. Under these conditions, price reductions are possible. The buyers are the ones who have the negotiating power in these conditions.
If you’re looking to sell your house this July, that means you’ll need to decide whether you’re in a buyer’s or seller’s market.
July is a Buyer’s Market
Long story short here is July is a buyers’ market. That means that people looking to buy a home now have more negotiating power. Consider some of these statistics about what’s generally considered the cooling housing market in Toronto specifically and Ontario generally.
Housing sales have fallen year-over-year. Recent reports from the Toronto Regional Real Estate board say sales were down a whopping 41% from June of 2021. There are some big takeaways from this number if you’re looking to sell your house in July.
Some of the slowdown can be attributed to seasonal trends but not all. The current cooler market conditions look like they will be around for a while.
Real estate professionals are pointing to several trends including rising mortgage rates and interest rates. However, they’re also saying that inflation which is at a 40-year high of 7.7% is cooling the market.
There’s more to this buyer’s market than meets the eye. Kevin Crigger is TREEBS president.
“Home sales have been impacted by both the affordability challenge presented by mortgage rate hikes and the psychological effect wherein homebuyers who can afford higher borrowing costs have put their decision on hold to see where home prices end up,” he was quoted in Yahoo Finance as saying.
That means that a lot of people are sitting on the sidelines waiting to see what happens.
Here are some other current developments that need to be considered:
- The Bank of Canada’s prime lending rate has been raised by 1% to 2.5%. It’s the largest increase in more than 20 years. Anyone with a variable rate will notice an immediate jump. For example, according to the CBC, a $400,000 mortgage over 25 years costs an extra $211 now. That can make buyers even more hesitant.
- Here’s another sobering statistic. According to Manulife Bank of Canada research, one in four Canadians report they might need to sell their homes if interest rates keep going up.
What It All Means
If you decide to sell your house this month, there are certain realities that you’ll need to face.
For example, you’re more than likely going to need to deal with lowball offers from prospective buyers. Some sellers are becoming more desperate as time goes on. One of the reasons is they’ve already bought another house. In order to get the financing to go through they need to sell quickly.
If you’re deciding to sell now, you need to take into account that there’s been a huge change in the market and interest rates in a short amount of time. Selling can be more difficult as the rates go up.
So, here’s a piece of advice if you’re looking to sell your house in July in Ontario. It’s important to sell the property you’re living in now before you buy a second one.
When the market was at its peak, you could buy a property first because you could rest assured you’d get a fantastic sale price.
Sell First in Today’s Market
In today’s market, it’s better to sell first and then you’ll know how much money you have to move forward. It’s the best way to budget if you’re planning on buying another property.
You’ll also need to factor in how much you think the prices are going to drop before you make a move. It’s important to calculate what you can afford on a monthly basis. For example, you need to balance a drop in your selling price and equity versus a raise in your new mortgage rate.