MODERATE CORRECTION CREATES BUYERS’ MARKET
There’s a lot of inventory, but no reason for a rush to sell, says Dennis Faulkner
Is it a good time to buy or sell in Edmonton? In order to properly answer this question, it’s going to depend on your reasons for selling or buying. So let’s look at a few scenarios.
Let’s say you’re in a home right now and you feel prices are going to drop. Should you sell? My initial response to you is going to be no. Generally speaking, it will likely cost you more to rent a similar home that you’re currently living in, and you have to live somewhere. Also, none of your rent will be going toward your equity, as you have no home in which to have equity. One of the advantages of home ownership is that a portion of your mortgage payment goes toward paying down your mortgage — a forced savings, of sort. Second, it will cost a significant amount of money to sell when you add up lawyer fees, moving fees, real estate fees, etc.
There is also the additional stress and time it takes to move, which has its own costs.
A second scenario might be that you’ve lost your job and you need to access the equity in your home to pay your bills. In this case, I might still say don’t sell. I would encourage you to look at all other options first, such as getting part-time jobs, perhaps taking a renter into your home, or even renting out your home if you have friends or family with whom you can stay. You might even consider selling some of your belongings to cover expenses for the short term until you get back on your feet. Perhaps you can renegotiate some of your bills or debt payments. I would recommend that you go talk to a credit counselling service — some are free and can really help out.
Perhaps you wish to move to a different location or size of home that better fits your needs. In this case, by all means sell and buy. You are simply changing your investment to one that works better for you. My advice in this scenario, in today’s market, is to sell first. Currently we do have a high inventory of homes for sale, which makes for stiffer competition for sellers, as we are in somewhat of a buyer’s market. In some ways now is a good time to do this type of transaction, as there is a good selection of homes from which to choose, and the likelihood of finding a home that works really well for you is very good.
Maybe you’re a first-time homebuyer wondering whether it’s a good time to buy. I would encourage you to buy for a few reasons. As I’ve said earlier, there really is a great selection of homes on the market, and the chances of finding one that you especially like is very good. Second, you may be able to negotiate a better price than if you search for a home in a balanced or seller’s market. Third, mortgage rates are still low, and locking into a mortgage for five to 10 years at these low rates might just pay off, compared to waiting and having to pay a higher rate.
Are prices of homes in Edmonton going down or up? With our current inventory of homes there is some downward pressure on home prices. I expect the market to soften somewhat, and there may be some price correction downward. I do believe that the reduction will be minor and short-lived.
Many have projected that prices would have fallen significantly by now, and they haven’t. Alberta is more than a one-trick pony, and our reliance on the oil industry isn’t as significant as it was in the 1980s.
We have many other industries that propel our economy, including agriculture, forestry, mining, manufacturing and tourism, to name just a few. Our current government is also taking steps to further diversify our economy with renewable energy investments that will reduce our reliance on big oil.
I believe one of our advantages that is often overlooked is our economic and political stability, which makes Alberta (and all of Canada) an extremely attractive place in which to live, work and invest. We joke about our cold climate and winter weather, but the fact of the matter is there are millions upon millions around the world that would jump at the opportunity to move to our province, to our country. You could say one of our greatest exports is our stability and security. And as our population continues to age and retire, we, as a nation, will have no choice but to increase immigration.
We’ve seen what’s happened in Vancouver and Toronto with the amount of foreign investment in their markets. Will we rise to the level of Vancouver and Toronto in the next few years? No, but I do believe that cities like Calgary and Edmonton are very attractive on the world scene, and that will draw immigration and investment in the years to come.