7 Top Local Realtor Share Their Perspectives on COVID-19's Impact on Housing Market:Current and Future
Yolanda Huo May 7th, 2020
As the outbreak of coronavirus, Canada economy has been greatly affected. A lot of customers in LAMOSE show their concerns about the real estate market. After doing some research, we noticed that Canadian housing market has been a topic that a lot of people are talking about. How did the COVID-19 impact the housing market, and what’s the future trend of the housing market? Will the housing market crash? If yes, when will that happen? If no, why not? To help people be more clear about both the current and future housing market, LAMOSE invited top 7 local realtors to give their ideas. Hope this blog can help you solve some confusion about the housing market!
Stephen Lau, BCom, LLB, REALTOR®
RE/MAX Real Estate
Cell: 780-905‐8282 [call/text message] LinkedIn:www.linkedin.com/in/stephenlau
WECHAT I.D.: slau7809058282
The potential impact of COVID-19 on the real estate market: a “best guess” prediction
Without a doubt, COVID-19 has impacted the lives of everyone around the world. The real estate market is certainly not immune to significant impact from this virus, as supply/demand/pricing of homes will be affected significantly.
COVID-19 has caused significant economic damage to the livelihoods of people everywhere. There is widespread worry about jobs and financial security. In these difficult times, you and your family’s health are of primary importance. We must care about our families and our fellow citizens.
Changes to life have been dramatic. People have been forced to work from home. Children cannot attend classrooms and have to study/learn from home. People are now forced to re-evaluate their priorities in life and devise new life plans and strategies to live life in a new way.
As Canada seems to have weathered the COVID-19 pandemic relatively well, the government has started to let businesses open again. While businesses may be resuming operations, the world as we knew it, is no longer the same. Many people are dipping into their personal savings to deal with their diminished incomes after being furloughed or laid off completely. Business owners are being particularly badly hit. Entrepreneurs who are self-employed have businesses that need to pay rent, staff, and inventory costs. Business owners often pay themselves last, if there is anything left over. Many people currently need emergency government support to pay their bills. There is no precedent for what is happening now. The government is also trying to figure things out with no past experiences to draw from.
Alberta’s real estate market
In every real estate market in the world, the underlying health of the local economy is a key determinant of the “balance of power” between buyer and seller. A robust and strong economy will lead to higher home prices. The opposite is true when the economy is in trouble. Alberta’s continued reliance on its resource industry (oil & gas) for government revenue makes it particularly vulnerable to geopolitical factors that are outside its control. With global oil demand having plummeted due to the COVID-19 pandemic and the further impact of significant excess oil supply being dumped on the market by Saudi Arabia and Russia, Alberta faces an epic financial disaster. Oil prices have tumbled to “near zero” which is decimating the province’s finances. If the provincial government does not have enough money they cannot continue to provide all the services its residents are used to. Layoffs have begun to be implemented across different areas where the government employs people. Job losses and salary cuts will impact civil servants, teachers, health care professionals (etc.) while also impacting the funding of government programs.
The shattered consumer confidence as a result of the impact brought by COVID-19 will have a strong impact on the real estate market. Home prices will likely start dropping if the economic news continues to worsen and consumer confidence trends downward.
In regards to the supply of homes for sale during COVID-19, many home owners who have wanted to sell their homes in the busy spring season have postponed doing so for fear of infected people coming inside and potentially contaminating their homes. Home buyers are delaying their purchases because they fear their financial situation is uncertain and they feel home prices may drop strongly if they wait long enough. What is likely to happen? What should a buyer or seller do?
Given that you are in a stable financial position and have a job which is not likely to be affected by layoffs, buying a house now may present a unique opportunity. A home buyer that can qualify for a mortgage in these uncertain times can probably drive a much better bargain against a home seller than otherwise would be the case in a more “normal” market. The challenge buyers may face now is that the home inventory available to choose from is down over 47% from April 2019. Working with an established Realtor may help a buyer potentially unlock the opportunity to view more homes than are currently available on the market. How? An established Realtor is often contacted by home owners to provide them with “market value estimates” in the months leading up to the actual time they want to put their home up on the market. Realtors may know of certain homes that are “coming soon” on the market and get permission from a home owner to let you see the property, even before it comes onto the “public” MLS market. Furthermore, Realtors often speak to other Realtors with homes in the neighborhoods you are interested in. This “networking” between Realtors will often help discover “pocket listings” that are currently unlisted but whose owners may be willing to allow qualified home buyers to see the property (before it officially gets listed on the market).
Often, home buyers “time their purchase” to coincide with their children’s school season. This is why many people start looking at homes between April and July so that they can make an offer on a property they like while simultaneously putting their own home up for sale. The home buyers that are best placed to take advantage of this market are first time home buyers who do not have the “hindrance” of needing to sell a house before buying. Being able to be flexible with a home seller to take possession of the house on a schedule that allows the seller to have sufficient time to look for their next house may allow you more negotiating leverage. Most home sellers do NOT want to risk making an offer on another house until they are certain their own home has a firm sale. A first time home buyer who is flexible with their “move in” date is likely going to get a better price on their purchase.
A home buyer who has “life reasons” for buying a home should consider buying in this weak market to take advantage of the general negative economic climate. A real estate investor may want to consider delaying their purchase until later in the year, however, to wait for more signals on how the general economy is doing. I anticipate a “flood” of “distress sales” towards the end of the year and early next year as homeowners with “deferred mortgages” worry about the end of their deferred mortgage periods (~6 months from now). If these homeowners cannot find employment that helps pay their mortgage, they may end up giving their homes back to the bank (in foreclosure). There may be an increasing supply of such foreclosure purchasing opportunities in the months following the end of any government/bank mandated mortgage deferrals. Keeping a close eye on the news would be an important exercise for “value buyers''.
It is a bad time to be a home seller. With the uncertain economic climate around the world, consumer confidence is down substantially. Demand for goods, services and homes will likely be diminished for the foreseeable future. Homes sales in the Edmonton Real Estate Board have plunged 55% this April compared to the same time last year.
The question a home seller needs to ask is: “what is my goal in selling my house”? Are you selling your house to escape the stress of a high monthly mortgage payment? Are you selling your house because you have a growing family and need a bigger house? Are you selling your house so you can downsize since your kids have moved out? There are many reasons why people choose to sell their home. You need to decide how urgent your need to sell is.
With the current economic environment, however, it may be better to be proactive to try to put your house onto the market now as there are limited competing properties against you. What kind of pricing should you expect compared to a year ago? Are prices likely to improve or get worse next year? While I cannot purport to be a fortune teller, there are enough general economic indicators that would suggest that the real estate market in Alberta will continue to be weak for several years to come. Job losses often lead to a “domino effect” on consumer confidence which leads to people postponing major purchases (homes, cars, and other durable consumer goods).
At the current time, it seems that consumer spending, following the end of strict home quarantine, will likely be diminished moving forward. The result will be that the homes for sale on the market may take longer to sell because there are fewer qualified buyers while there are also more houses to choose from (more supply than demand). I project a strong buyer’s market in the next few years. People will generally be more financially conservative on their home buying decisions and may reduce their budgets to account for unforeseen emergencies, like the one we are in the midst of.
The homes which are the most vulnerable to substantial price weakness are older homes that have less appeal to younger buyers. These homes may be skipped over as they are less appealing or modern in their aesthetic by today’s standards. Furthermore, older homes start to have problems as the functional life of key components (roof, furnace, windows, etc.) tend to fail/need replacement in the 20-30 year home age. The costs to remediate these issues are not insignificant. In consideration of the potential issues/risks of buying an older home, we will see home buyers adjust their offer prices substantially lower. I anticipate homes over 25 years in age will see their values drop by over 5% in relation to the home’s city assessed value over the next year. There may be a benefit for home buyers to consider these older homes as there is likely more room to negotiate. An older home with a large, sub-divisible lot could be a good investment as the lot could eventually be split and two houses be built (for example). The investment value would be stronger in high-demand areas near the University or near downtown.
In Alberta, people will need to purge their minds of the belief that real estate values will generally keep going up in the long-term. All economic signals would indicate that the underlying economy is stagnant or getting worse as our provincial finances are in shambles post-COVID while the oil industry is simultaneously in deep retreat. As I had discussed in a previous article, if a buyer intends to live in the city for the long-term and has stable finances... buying a home within their budget supported by a large down payment... would be a prudent financial decision in building equity and long-term wealth.
Buying or selling a home with an experienced Realtor is of critical importance in a challenging market like we are facing now. A Realtor will guide you through the negotiations process while fighting for the best price on your behalf.
Predicting when you should buy or sell real estate is always a challenge. There are no right or wrong answers as your decisions should be guided by what’s best for you, given your life circumstances. In the long term, you will build equity in your home as you pay down your mortgage. So long as your time-horizon to stay in a house is over 5 years from the time of purchase, most times you will be better off buying a house... even if you ended up not buying at the “lowest” point in the market. Sellers, on the other hand, will have to price their homes aggressively to get their homes sold. The “flood” of homes coming onto the market next year following the end of any mortgage deferral options provided by the banks... will lead to a potential crisis in the market with potentially many homes coming onto the market in foreclosure.
Address: 6211-187B Street, Edmonton, Alberta T5T 5T3
How the housing market is going to be after COVID-19 ?
Edmonton’s housing market will likely experience an increase in prices after the COVID pandemic, but nothing dramatic. This is an opinion based solely on what I’ve experience working as a Realtor during the pandemic as well as a review of easily accessible Realtor data. As of right now many sellers are holding off on listing their homes but not nearly as many buyers. This shift in demand and relatively static supply is driving prices down.
Edmonton Job Loses
A significant portion of Edmonton’s population is currently laid off or worried about being laid off. Almost all these layoffs are thanks to the COVID Pandemic. Many of these individuals were planning on purchasing a house this summer. In the eyes of future homeowners, buying a home in Edmonton has gone from a relatively stable long-term investment to a high-risk decision. Until things are back to normal this is likely the most significant factor affecting the demand for real estate in Edmonton.
Timing is Everything
Depending on how long the COVID Pandemic lasts when life is back to a relative normalcy, we may see a large, all at once, increase in the demand for Real Estate. Timing is important in my opinion as most buyers, no matter what, want to purchase in the summer. If we do not see a removal of restrictions before August, I believe we will not see a normal spring market bump in prices. If things settle down in June or early July, we may see an increase Real Estate prices as demand picks up before the weather changes.
The Good News
In comparison to major systemic market lows in the past I do not see COVID-19 having any long-term effects on Edmonton’s Real Estate market. The COVID Pandemic will have similar effects on the economy as a natural disaster. I hold this opinion as there is no significant human error involved in COVID, unlike the 2008 housing crisis or other significant economic woes of the past. When life gets back to normal, whether that happens this summer or later in the year, the economy will likely move back to pre-COVID levels of activity.
Address: 1128 Lake Twintree Drive SE. Calgary, Alberta T2J 2T1
How the housing market is going to be after COVID-19 ?
It is a question that everyone wants to know the answers to, what happens after COVID to the housing market? As I write this and look at the stats from April 2019 and April 2020, I see a HUGE difference. Total Calgary sales in April 2020 is 572 deals down -62.95% compared to sales in April 2019 of 1,544. The new listings are down -54.38%, the active listings are down -21.39%, and the average price is down -8.25%.
So, what does that tell us about the Calgary Real Estate market and things to come? I feel we will see a slow rebound to this. It is going to take time to get our economy restarted and people back to work. May 14th is an excellent goal for phase one, but not everything returns to "NORMAL" for them that day, if ever. You cannot buy a house if you can't qualify to get a mortgage, and you need a job to get a mortgage.
Based on my previous boom and bust experience, I feel the people that can afford to sell and have equity in their homes, could take advantage of the move up potential, and purchase homes that at one time were out of consideration for them. People with little to no equity in their homes are going to have to wait to sell or consider foreclosure as a last resort.
We have experienced this in Calgary after most downturns in our economy and market. 2007 and 2014, we witnessed some of Calgary's highest real estate prices. In the downward years after, people wanting to move turned their primary home into a rental property, or they chose to do things like renovating or updating so that they could get by. Obtaining a second mortgage at that time was also a lot easier without the stress test, and difficult criteria asked of every Canadian to purchase a home.
So, what should you do? If you are one of the lucky ones that have equity in their home and want to take advantage of some lower prices, it's a great time to buy, but know that it's going to take a lot longer to sell your home as well with fewer buyers in the market. Listen to your Real Estate Advisor. He or She should have a lot of stats and info and help guide you to a successful buy, sell, or both.
If you cannot afford to sell, or you can't qualify to buy due to not having a job at this time, you are not alone and are stuck like a lot of other Canadians. Unfortunately, you will have to wait until you can re-qualify and move forward. Because of this, we will see fewer options for people to buy, so as strange as this sounds, we will most likely still see multiple offer situations on homes that are in desirable communities and are priced and marketed well.
Know your numbers, have a realistic timeline, and make sure to follow any measures put in place to sell your home safely during this unique time. Calgary has a lot of great realtors, mortgage brokers, home inspectors, and a board that has put out documents to ensure everyone is transparent about their current COVID status. Follow the information provided by all these experts, and you will have a smooth process and be safe and happy for years to come.
How COVID-19 has impacted the housing market in Edmonton & surrounding areas?
I think every Homeowner, Investor or Realtor would strongly agree that spring and summer seasons are the time for the housing market to pick up and take off. Unfortunately due to COVID-19, we initially did not see quite the pace as we all anticipated for a spring market.
Due to the high number of buyers and sellers being uncertain about the economy, their job stability and their income, at the initial stages of this pandemic, we saw a decreased number of buyers and sellers that were willing to continue trading in real estate.
Many homeowners that wanted to “test-out” the market fell through the cracks and their homes came off the market.
Once the number of active homes in the market decreased slightly, we started to see an increased number of more serious buyers out shopping.
Buyers are very much aware that the time to get a “good deal,” is now because if a seller still has their home in the market, they are motivated to sell.
We are starting to see a late spring market in YEG! The warm weather is bringing out more buyers and transactions are closing on a daily basis.
As a homeowner, as long as you price your home accordingly, you will see your home sell earlier than anticipated! The key is to price your home correct starting from the start.
Buyers are looking for a deal, so be smart, price your home accordingly and you might not even have to entertain any low offers because you might be one for homes with MULTIPLE OFFERS.
Cell: (647) 282-9706
FB: Kokilan Maheswaran Real Estate
How the housing market is going to be after COVID-19?
I see the housing market returning back to normal but even more heated in the sales & rental market compared to where we left off.
For resales, there is going to be pent up demand from the period of COVID-19. These buyers/sellers were going to buy/sell during this phase, but had to hold back.
There are going to be the natural supply of buyers/sellers that usually come out during the time whenever the pandemic is over.
Also there are going to be the buyers who have FOMO (fear of missing out) who come out to the market as well. They may realize that they waited too long and may want to invest in real estate before its too late.
For the rental market, if the pandemic is over; Airbnb may return to normal as well. With that being said, the amount of supply may go back down to what it was before. This would go back to the very low vacancy rates and high rents charged on these properties.
We already know that during the spring and summer months, the market gets heated. If the pandemic is over, we may see a strong rebound.
ICI Source Real Asset Services
How the housing market is impacted due to COVID-19?
In the short term, we can expect to see market activity slow down. Buyers may decide to hold off, while sellers—may be hesitant to accept a lower offer.
However the market should rebound.
According to RE/MAX, the outlook is positive. “For buyers who have the means, real estate has never looked more enticing,” Home prices may see more of flattening than significant dips.
Interest rates are low. This may also be because real estate is a more sound investment, than stock markets that are volatile, and investors are looking for safer places to put their money.
Next year, the market should pick up, with low interest rates, a strengthening job market, a bounce-back in immigration and price dynamics also returning to favour sellers.
Regardless, this is Vancouver, historically housing prices have trended upwards. Advice for sellers is - we will have dips in the market, so unless you absolutely have to sell, hang tight until the market bounces back. You can rent out your property in the meantime.
Address: 201, 5607 199 St NW, Edmonton, AB T6M 0M8
Cell: (780) 222-2513
Current housing market and its future trend
Social distancing has restricted the physical access into the people’s homes, and the fear from COVID-19 spread with homeowners caused the industry to pivot. We now see a push to use video and digital engagements to continue with the sales process. There was very little activity in the housing market when the City became experiencing restrictions and social distancing became the new normal. There were a lot less transactions as a result. This was largely due to uncertainty with jobs in the form of temporary layoffs and fear with contracting COVID-19. As a result a number of transactions that would have occurred without the COVID-19 pandemic sweeping through the City didn't in fact take place.
In a recent interview that I conducted with Dennis Ward of Mortgage Tailors via zoom we discussed that banks are becoming stricter with mortgage applications and that a number of his clients are being asked for evidence for down payment reserve of funds. He added that this is a requirement that was uncommon to be asked for by lenders pre-pandemic. The Clubhouse Group, my real estate team in Edmonton, have seen a rise in activity towards the end of April and beginning of May. This shows confidence is starting to return slowly. It appears that this may just be a delayed, spring market. It appears that a number of listings that had held off due to COVID-19 are now listing in May.
Wish these views regarding on the housing market above, hope your confusions can be sloved more or less. Please feel free to contact us by firstname.lastname@example.org or any realtors above if you still have questions, LAMOSE is always here to give you a hand!
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