Buyers Market? Depends...

Buyer's market? Depends on motivations says local REALTOR
Canada's longest housing boom of the post-war period has come to an end, according to the latest Real Estate Trends report released November 20 by Scotia Economics. The reversal of fortune has been most pronounced in the previously hottest markets of Western Canada, including Calgary, Edmonton and Vancouver. "In Ontario including Niagara-on-the-lake we are witnessing a cooling off but not to the same degree as in the West. Our local real estate market experienced a decrease in unit sales of 68% from last October primarily because sellers are not attracted by offers being made by prospective buyers," according to Gary Zalepa Jr. Broker. "Buyers are actively making offers, it is just that sellers are not interested in their terms".
"This is not a 'U.S.-style' bust caused by overbuilding, speculative buying and imprudent lending, but rather a cyclical slowdown accompanied by a valuation adjustment in several large centres where booming demand conditions and temporary supply constraints led to an overshooting in prices," said Adrienne Warren, Senior Economist and Real Estate Market Specialist, Scotia Economics.
The report cautions that real price trends are not a particularly useful guide to future price movements, at least over the short-term. The driving forces behind the price appreciation as well as current supply and credit conditions are more important. Record unsold housing inventories, mounting foreclosures, overbuilding and credit constraints are bigger factors behind the continuing and steep slide in U.S. home prices than overvaluation, none of which are major concerns in Canada.
In Niagara-on-the-Lake we do not have an oversupply. Infact we have 6% less homes available for sale today then we did at this time last year. This suggests that prices will remain steady during this period and there will be fewer sales. Buyers may find some sellers willing to accept lower prices but for the most part sellers will and can wait for the market to improve.
"There is further downside risk to home prices in Canada, especially in light of reduced growth and employment prospects," said Warren. "We expect, however, that the correction in national average prices from their late-2007 peak will probably be in the range of 10 per cent-to-15 per cent, well below the ongoing U.S. retrenchment."
At this point motivations are what is key in any housing transaction. If a seller is motivated primarily by the economy then they will be more likely to accept a lower offer. Most sellers in the NOTL market are some what insulated from the economy and these sellers will not be looking to part with their home for less than market value. So if you are a buyer looking for a bargain it may take you several attempts with offers before you find a seller sufficiently motivated to accept your lower price.

Market headed Where?

Where is the Market Going?
According to RBC we are experiecing a "Housing Downturn- Canadian Style"
Let me explain...
For the past two years we in Canada watched as the US and UK experienced a housing collapse fueled by overpriced housing and extensive speculation leading upto the correction. When was it coming here? Well it is here and as the RBC Economic Report -Housing Trends and Affordability indicates Canada is in a much better position than either the US or UK.
Primarily the subprime mortgage portfolio in Canada is not as large a percentage of the overall mortgage market as it is in these other countries. It is true that Canadians are carrying increased debt loads than they have in the past but they are not overstreched. Also we have not experienced the high level of speculative behaviour in the new construction market that these two countries have been through. Housing inventories according to CMHC are slowly balancing to better meet demand. Simply we do not have a large over supply of new housing sitting around. In fact in Niagara-on-the-Lake we have practically no supply of this type of housing and resale market inventory is just a small percent below the 2007 level.
Consumer confidence has been shaken. Across Ontario we are witnessing sales activites drop considerably from 2007 levels. According to the RBC, Ontario is "succumbing to the economic blues" and this downturn will not be as drastic as the one in 1990. RBC identifies that housing affordability has not been eroded.
Across Canada in 1990, over 60% of our income went towards housing costs. Today in the Niagara Region that figure stands around 25-28%. (depending on the housing style you occupy) Interestingly that figure is lower than the average in Ontario, where the average family contributes 29-50% of their income to housing costs.
The key message is that there is no price bubble in Niagara and our community is very affordable and well positioned to attract home buyers into the next several years. Our local market is in balance and trending towards a buyers market in some areas. This fact is supported by the local MLS sales to new listings ratio which is in the 0.4-0.6 range. Niagara-on-the-lake's ratio for November was 0.55 indicating a balancing market that is closer to a seller's market than the rest of the Niagara Region. November unit resales were just 1% below 2007 figures and year to date unit resales are down 20% from 2007 levels.
If you are a buyer don't wait too long for NOTL seller's to accept sale prices below their current market value. Sellers today are receiving market value for their homes. This should not be confused with seller's adjusting their asking prices which may not be in line with actual market value. This adjustment will occur as seller's adjust thier expectations. The gains that seller's expected in the fall are not true for today.