With recent interest rate hikes, including another 0.5% increase June 1st, we’re starting to see the housing market slow.
Multiple offers are still common, but only on well prices, desirable properties. Over priced and less desirable properties are sitting on the market. Many sellers are resorting to price reductions (sometimes drastic) to get the property sold. Some sellers are simply pulling their property off the market.
There are still many buyers pulling the trigger, but with increased inventory they have the option to be a bit pickier. Many buyers that had given up buying a property because of the bidding wars, are now holding off because of the market uncertainty. For those buyers that require a mortgage, their borrowing power has been drastically reduced due to the recent interest hikes.
Balanced market returning
Much of the negotiating power that sellers had over buyers is gone as we head towards a “balanced market”. The desperation of subject free, cash offers, for well over asking, have be replaced with fair negotiations between buyers and sellers to get terms that both parties agree too.
Some sellers are in a position where they have to sell. If they’ve bought another house, or need to move out of the area for a new job, there’s likely a deadline. Offers are now collapsing due to financing at the higher interest rates. This leaves sellers in a panic situation if they’re expecting to have their house sold by a certain date. A low, cash offer might gain a lot more traction now than it would 3 months ago.
Vancouver Island is one of the most desirable places to live in Canada. I believe we will continue to see demand for housing but we are seeing the effects of higher interest rates. As the Bank of Canada tries to get inflation under control, asset prices will begin to stabilize.