A hot market is a “seller’s market”,
where properties can sell within a few days of
being listed, there are often multiple offers, and sometimes homes even sell
above the asking price. A “buyer’s market” on the
contrary usually includes houses that may sit on the market for some time. It can also be characterized by fewer and
lower offers.
several implications for the buyer and the seller.
Implications of a “Sellers Market”
In a seller’s market
there are more buyers than sellers and as a result property prices often go up. At first thought, this may seem to be a
negative effect. However there are
benefits, because it drives the market prices upwards. That is, when you are ready to sell your home
you will likely profit from it.
Implications of a “Buyers Market”
The primary positive
is that because there are more sellers than buyers it increases the competition
and as a result more competitive pricing.
This is great in theory, however if the market continues to drop in value,
it can cause your mortgage to go upside down, as your property will be worth
more then what the market value is. Of
course if the market dramatically changes and property values go up, then a
property could go up significantly in value.
Now that you have a
clearer understanding of the pros and cons of each type of market, it gives you
a better idea of when to seek out a mortgage.
However, the housing market is mainly a “stable” market which means that
none of the above implications directly apply.
Offers will not present themselves solely on the high or low ends of the
spectrum and sellers could find themselves with multiple offers on their
property or with few offers spread out over long periods. As a first time home buyer or just as
somebody that is not sure about market changes, having a mortgage broker to guide you is
extremely important. Although, no one
can fully predict the market they are knowledgeable enough about market trends and mortgage news that they can serve as great guides for uncertain buyers.
In the GTA the
housing market is said to expect an increase this year of up to 5% according to
Central 1Credit union (https://www.thestar.com/article/903412–gta-housing-market-to-stay-hot-in-2011) and home buyers are already seeing housing
prices creep up. However in an ever changing market there is scepticism and the
Toronto Dominion bank and CHMC have stated expectations for lower starting
prices for housing or minimal increases at best.
There are many factors
in play here including recent changes in the maximum allowable amortization
period, which dropped from 35 to 30 years causing people to rush to qualify
under the longer amortization period before the March 18th deadline
caused an increase in 1st time buyers and as a result increased
competition amongst buyers and increased sales prices as a result. This is expected to change as we move onward
into the second quarter and the market regulates and stabilizes.
Looking at this
graph View image you will see the sporadic nature of the market, and also may be in a better position
to draw your own conclusions about what to expect as a prospective buyer in the
next few months. Also remember that you are not
alone in this, why not consult an expert and have a broker guide you through
this unpredictable and unfamiliar territory. The great thing about a fluctuating market is that anyone can benefit from it at one time or another depending on what their desired result is. From those looking to buy when the market is in a slump resulting in lower housing costs, to those that choose to purchase at the height of the market so that they can be sure that they will garner the greatest property value in the long run, the market has something for everyone.
