Perhaps now may be the time to get a real estate CMA on your home.
It’s the topic that everyone loves talking about- the housing market. Whether it’s with family, friends or co-workers, it has almost become as Canadian as discussing the weather.
The Guelph housing market has taken us on a wild ride over the past year. Depending on what data you look at, the story can vary dramatically. Is it time to panic?
Supply and Demand imbalance
In April 2017, the Guelph market had an extremely low supply of houses. Measured in Months of Inventory (MOI), the Guelph market had under one month’s supply which is a dangerously low number.
Essentially, it means the entire housing stock in Guelph could be sold in less than a month. Many speculate that GTA buyers were suddenly cashing in and moving to a cheaper market like Guelph.
There are no definitive stats measuring out of town buyers. Our data indicates that over 30% of buyers came from out of town buyers. As a result, housing prices soared.
It forced builders to increase their developments at a rapid pace in the south/ east sides of Guelph. At the peak of April 2017, 78% of houses sold above their asking price. For some perspective, only 29% sold over asking in April 2018.
But there are other implications of an extremely tight supply: buyers are forced to purchase a new house without conditions. What they paid for it was not what the bank valued it at the time of closing. As a result, the buyer would need to make up the difference.
Now may be the time to get a real estate CMA, while there are few other Guelph houses for sale.
Or consider Guelph home inspectors who had a dramatic loss of business in Q1. No one was getting an inspection in order to remain competitive for a house. Mike Heeley, owner of Heeley Home Inspections estimates first quarter 2017 sales declined almost 40% YOY before picking up again in the fall.*
The Government steps in to make a change
The government stepped in with their Fair Housing Plan in April 2017. This was designed to table some discussion points around housing supply, demand and processes. Topics include rental housing, real estate investment processes.
Then in July 2017, after a 7 year status quo, the Government raised interest rates. Home owners started to lock in and stay where they were. This slowed the buying trend and by October 2017 inventory started to spike. Interest rates have gone up two more times since then.
The real estate industry loves to compare year over year statistics. Sure, looking at 2017 vs 2018 you will notice a severe decline. But unless you bought in 2017 and plan to sell in 2018, this month over month view is irrelevant.
Most Guelphites buy a home to live in it, with investment value in the back of their minds, but not a short-term priority. Over a two-year period, Guelph homes have increased 25% in average price and 36% over 3 years in average price. Those are impressive numbers that often get lost when reporting year over year sales. It’s no different than your long-term RRSP or stock portfolio for most people; you may look at the increase or decrease in value over a one year period, but it’s unlikely you’re going to cash out because of it.
As of May 2018, the market is becoming more of a balanced market. For buyers, this means that the traditional conditions of financing, inspection and sale of their own property are starting to reappear. Buyers are more likely to be able to negotiate a deal. But sellers?
Considering getting a real estate CMA (Comparative Market Analysis)
Often known as “comparables”, a real estate CMA is designed to give a home owner the confidence of knowing a few different things about the local real estate market.
Firstly, it would tell them how the market itself is performing. Ideally, it would also address the specific Guelph neighbourhood that the potential sellers home is in.
Secondly, the homeowner would provide all the details/ features/ updates of their own home. Any updates (think roof, furnace, AC, renovations) that have been done are also accounted for.
Lastly, the Realtor will take this information into account to provide a real estate CMA. The real estate CMA process is different for each client and there is no set format for it. However, it should be enough to provide a good idea of current market value of the sellers home.
It’s worth noting that the real estate CMA could also contain pricing strategies. It’s impossible to know how motivated a buyer may be purchase your house. As a result, your Realtor should have a strategy to protect the seller (think insurance) in case something unexpected happens.
*Source: 2015-2018 GDAR data, City of Guelph proper 18 measured neighbourhoods.