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Because of falling house prices, some buyers have regretted the frenzied bids they made during the housing frenzy earlier this year, according to Globe and Mail.
Claire, an economist at Royal Bank of Canada RBC. Claire Fan says housing demand across the country is cooling rapidly, moving from a more seller-friendly market to a more balanced area.
Fan pointed out that the slowdown in June was particularly severe in the regions with the strongest and highest prices during the pandemic.
In Toronto and Vancouver, markets have proved more sensitive to central bank interest rate hikes because average house prices are higher and home loans are larger.
New listings were still quite strong in June, while demand fell sharply, which led to a decline in new home sales in all regions, she said.
In the Duran district east of Toronto, there have been stunning price increases over the past few years.
At the beginning of the epidemic, detached houses in family-friendly communities were relatively affordable.
However, due to the continuous increase in the number of days on the market, the phenomenon of forced price reduction is becoming more and more common. This rapid shift has unnerved some sellers.
Real estate company Coldwell Banker R.M.R. Shawn Lackie, a broker, said inventory was unusually low last June, at 712, compared with 1414 last month.
Lackie says the initiative has now returned to the buyer.
He advises sellers who are about to enter the market to be patient in accepting any offer.
“your first offer is usually your best offer,” he said. “even with conditions, talk about it.”
Nowadays, home buyers often offer house inspection and loans as conditions to quote contracts, which gives them time to think about it and either finalize the deal or withdraw.
Lackie now has every transaction checked by a lawyer.
“it’s common sense that if something goes wrong, at least we have a lawyer involved in the first place.”
The market in Duran peaked in February, when the average price reached C $1228990. The average price in June fell by about 20% to C $972354.
Lackie said that now some buyers are asking for a price reduction based on the current market, and sellers are forced to decide whether to renegotiate or not.
In the Courtice area, a house listed for C $799000 in February and March usually sells for between C $1.15 million and C $1.2 million, which is often higher than the asking price of C $500000.
Spring purchases are nearing handover, but average prices in the region have fallen sharply.
For example, if buyers expect the price of a house to have fallen by C $260000, they may rather lose the $60, 000 deposit they have already paid than give up the purchase, Lackie said.
In this case, the seller put the house back on the market. If they end up selling at a lower price, they may take legal action against the original buyer.
He suggested that the seller had better reach a compromise on the price and then close the deal.
Lackie points out that it may take two years or more for sellers to sue, and some sellers will agree to lower prices when they know they are still profitable.
“everyone needs to realize that there can be no more greed.”
Another problem is that if the market value of the property has fallen since the quotation date, and the buyer needs a loan, but if the bank’s valuation is lower than the selling price, the buyer must make up the difference.
“you have to come up with another $300000, because the bank will definitely not pay for you,” Lackie said. This is when the chaos begins. ”
In many cases, young buyers turn to the “parents’ bank” again, he said.
Lackie expects the market to remain calm this summer and the number of home listings to surge again in September.
He predicts that some sellers will come from people who moved to the suburbs during the outbreak but no longer want to commute. The other part is homeowners who are under financial pressure because of rising interest rates.
Looking ahead, Imperial Bank’s Claire Fan warned that as the central bank continues to raise interest rates, housing affordability may continue to decline, more home buyers will wait and see, and further lower house prices.