So, the covid pandemic has come and gone, or at least the pandemic portion of it. If you have been shopping for a house in the last year then you may have noticed some changes. Here in Winnipeg, we are back to having options to look at on the market and less competition than you were up against in 2020/2021. The start of 2022 looked as though it would be heading in the same direction, that is until the Bank of Canada announced increases to the interest rates. As it typically does, this increase in interest rates has required purchasers to take a second look at their approval rates for purchases and even the budgets they are comfortable working with. A similar situation occurred in 2018 when the bank of Canada increased the overnight rate. Purchasers slowed down on their search, choose more affordable options and there was a general slow of the market.
Now flash back to the start of 2022, everything looked as though it would continue in the same direction as 2021/2022, that is until the rates began to change in March with the start of the changes to the overnight rate. This allowed people who still had a recent pre-approval to receive lower interest rates through many lenders. Now the overnight rate has risen multiple times in 2022. Currently at 3.75% thanks to another 50 basis points on October 26th, making this the sixth consecutive increase from where we started the year at 0.25%. That is the highest it has been since 2008! As someone who actually purchased a home in 2008 I honestly don’t remember being blown away with the rates at the time. I think that the past two years of the Bank of Canada trying to stimulate the economy has left purchasers with a bad taste in their mouths.
If there is one thing to be thankful for as a buyer in the current market it is the ability to choose through options and being able to fully vet a house before purchasing.
During the pandemic homes were typically on the market between 7-10 days. At the end of which an offer date saw multiple groups competing for a house, increasing the prices significantly. Now with the rate increases we are seeing less and less of that situation. While not gone completely, and it has been around at least over the last decade on certain houses, the odds of getting into a “bidding war” has decreased significantly. This allows buyers to spend time searching through multiple house options and taking a bit more time in figuring out what works for them. In regards to offers this market has also allowed for more due diligence when vetting a property. Offers with longer condition times and home inspection conditions are more common which was much more difficult when competing against other offers.
As a buyer this gives you the opportunity to potentially have multiple viewings on a home, find out what may be needed for work required if you do a home inspection and generally get a better “deal” on a home purchase.
That brings me to purchase prices, however. A lot of conversations I have had with clients and potential clients is the conversation of low offers on properties. While the given market does allow for more negotiation with regards to price you have to remember that values increased dramatically over the past few years. A correction is likely going to happen but you should still be looking at properties within a $5000-10000 amount above your comfort zone. That means if you are pre-approved for $300K then at most look for a house at $310K, but again that depends on other factors as well. How long has the home been on the market? Has there been a recent price drop?
Some things that haven’t changed though are the steps you should take as a buyer.
If you feel you are ready to start your home search then the first thing you need to do is get a pre-approval from a lender. Even if you have an idea of what you want to spend on a home a pre-approval will dig into your financials and let you know EXACTLY what you can afford to spend. That doesn’t mean you will want to spend that amount either, so once you know what your budget is then move on to step 2. Reach out to a real estate agent. Due to our new regulations governing realtors you will need to have a buyer’s service agreement in place for an agent to help you view homes, advise you on the market and prices and also help you offer on a home. If you want more info on buyers or sellers service agreements feel free to reach out. Once you have a pre-approval and a service agreement with a realtor you are ready to view homes and start your shopping.
As with any change in the market it is best to get advice from the people who do this everyday. My team and I are always happy to talk real estate and are always open to teaching prospective buyers about the market, house information in Winnipeg and how to get going on the plan for your new home.
Tel: (204) 226-1261