Real Estate 2018: What to Expect
Real Estate 2018: What to Expect
As we head into a new year, the most common question I hear is, “What’s the outlook for real estate in 2018?”
It’s not just potential buyers and sellers who are curious; homeowners also want reassurance their home’s value is going up. The good news is that a strengthening economy, coupled with low unemployment & interest rates, is expected to drive continued real estate growth in 2018. However, recent and coming changes could significantly impact you if you plan to buy, sell or refinance this year.
HOME VALUES WILL CONTINUE TO RISE
Get ready for another strong year! Halifax Regional Municipality home values and sales volume will continue to rise in 2018!
Experts agree that home prices will increase in 2018, but predict a slower rate of appreciation than 2017, which clocked in at nearly 7 percent nationwide. However, it is important to remember that the real estate market is “LOCAL”. As we are all very aware, what happens in Toronto, stays in Toronto 😉 The Halifax market is healthy but very different. The consensus of local experts is an expectation of 2% to 3% price growth in 2018, mainly due to new changes to mortgage application requirements and other recent adjustments, meant to slow down the hot markets in Toronto and Vancouver. It is important to remember this prediction is for the whole of HRM. There will be areas that will easily exceed 3% and others that will see little or no increase. The real estate market is “Local” right down to specific neighbourhoods.
What does it mean for you? If you’re a current homeowner, congratulations! Real estate still proves to be a solid investment over the long term. And if you’re considering selling this year, there’s never been a better time. Contact me to request a free Comparative Market Analysis to find out how much you can expect your home to sell for under current market conditions. Winter is often when we see the largest price increases of the year because there are fewer homes on the market, which usually translates in slightly higher sale prices than than later in the year.
If you’re in the market to buy this year, there’s good news for you, too. Although prices continue to rise in HRM, wage increases have pretty much kept pace with the rate of property price growth. Still, don’t wait any longer. Prices will continue to go up, so you’ll pay more six months from now than you would today. now is the time to start looking. Contact me to setup a free, no-obligation automated property search and get notified about listings that meet your criteria as soon as (or before) they hit the market.
NEW CONSTRUCTION WILL AFFECT PRICE GROWTH
Lack of inventory in the housing market drives up home prices. If your home is in a neighbourhood or subdivision where there is substantial new construction taking place, it can definitely affect your home value negatively. Buyers will often gravitate to a smaller new home on a smaller lot, priced similar to existing homes in a nice neighbourhood. The reasoning is new homes are usually more energy efficient, have all the latest technology and promise very low maintenance requirements, all of which especially appeals to the emerging Millennial market.
What does it mean for you? If you are thinking of selling your home, make sure you do the basics, paint, repair, replace, clean and declutter. Advice from your Realtor® and a home stager is almost mandatory these days. You need to be competitive. Contact me for help with this, with no obligation on your part. If you are thinking of buying, don’t be quick to rule out older homes in great neighbourhoods, needing some updating. It is often possible to arrange quotes for improvements before your sale closes and finance them in your mortgage, meaning you don’t have to have extra cash on hand to pay for them, or wait to save up funds.
MILLENNIALS WILL MOVE THE MARKET
The Millennials’ search for new entry-level homes comes with a catch though … they will be located in the suburbs, where the availability and lower cost of land development makes it more cost-effective to build. Economists predict that’s where millennials and first-time buyers will flock for the greater variety of homes at affordable prices.
Rising home prices, a sluggish job market, and an increase in student loan debt made homeownership largely unattainable for many millennials in past years. However, there’s significant evidence that this trend is turning around. Millennials are now the largest growing force in the real estate market, as the baby boomers in HRM sell off and retire to apartment living.
As millennials age, they are settling down and having families, which has prompted a move away from apartments and increasing demand for larger but affordable homes. Thus, many are flocking to the suburbs, with about 57 percent of millennial buyers already opting for a suburban location.
What does it mean for you? If you’re a millennial who has been priced out of urban living, or is looking for more space for your growing family, a number of suburbs in our area have a lot to offer. I can point you towards the communities that will best meet your needs. If you would like a copy of my up-coming e-book on the complete home buying process, contact me. No obligation, of course.
And if you’re a suburban homeowner with plans to sell, you should contact me too. I know how to market your home to millennials, especially through social media… and can help you sell quickly for top dollar by appealing to this growing market segment! Contact me to request a free Comparative Market Analysis by email, no-obligation!
BABY BOOMERS WILL RETURN TO THE MARKET
The second most common question I hear is “Who is going to buy all these condo’s being built on Halifax peninsula?” While there is a steady influx of well-off immigrants to Halifax who are very familiar and desirous of big city condo living, let’s not forget that “Baby Boomers” and their parents still comprise nearly half the population of Nova Scotia. Numerous Boomers from all over Nova Scotia have already sold their real estate and defaulted to one of the new “luxury” apartment apartment buildings in suburban HRM, often because there was nothing to buy on the real estate market that met their needs. Some Boomers are finding the adjustment to apartment living difficult or not what they expected. Others, who have owned and paid off homes over their adult lifetime perceive paying $1,700 – $2,000 a month in rent as a waste of hard earned money. Our local real estate developers are very aware of this potential, which explains the massive on-going condominium apartment construction on the Halifax peninsula and downtown. These condominiums will mostly be completed just as a significant percentage of renting Boomers tire of suburban apartment living and look for alternative options. Plus, when you consider that the majority of Baby Boomers have not yet sold their family homes and downsized, you have your answer as to who will buy these new condo’s.
NEW RESTRICTIONS ON MORTGAGE LENDING WILL AFFECT THE MARKET
The Office of the Superintendent of Financial Institutions (OSFI), which sets Canada’s mortgage lending rules, published changes in October 2017 which took full effect on January 1st. These changes are just one more step in the struggle to prevent a major price correction in the hot real estate markets in Canada, mainly the Greater Toronto Area and Vancouver. By slowing down the exponential sale price growth in these markets over the last few years, it is hoped that the market will come to a “soft landing” and protect the equity of property owners. The rest of us, who are experiencing “normal” healthy growth of property value, in line with inflation and low interest rates, will experience the effects of these changes as well. The consensus among local lenders seems to be that the borrowing power of home buyers in HRM has been reduced by about 20% as of these recent changes. This is expected to affect demand for entry level and mid-price range properties for the first quarter of 2018, as potential buyers either decide to come up with a substantially bigger down payment or adjust their housing expectations downward and look at lower priced properties. I don’t believe the effect of these recent changes will have a big impact on the real estate market over the long term. Here’s why:
Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2% —- Insured mortgages, i.e. those for more than 80% of home value, are already subject to this requirement, and the market has adjusted nicely.
OSFI is requiring lenders to enhance their loan-to-value (LTV) measurement and limits so they will be dynamic and responsive to risk. —- Most conventional lending institutions are already doing this
OSFI is placing restrictions on certain lending arrangements that are designed, or appear designed to circumvent LTV limits.— I think this is aimed at speculative buying, not a big concern in the HRM market
INTEREST RATES WILL RISE
No one knows exactly what will happen with mortgage rates this year, but the Bank of Canada has hinted that we will see 2 to 3 increases in 2018 to the benchmark interest rate, which could mean at least 1% higher mortgage interest rates by the end of 2018.
What does it mean for you? If you’re in the market to buy, act now. Rising interest rates will decrease your purchasing power even further, so act quickly before interest rates go up. Contact me today to get your home search started.
And if you’re a current homeowner who is considering refinancing or a home equity loan, don’t wait. I can help you estimate your property’s fair market value so you’ll be prepared before contacting a lender. Also, if you are thinking of moving to another Lender at the end of your mortgage term, be absolutely sure you can still qualify under all these new rules before you do anything. If you stay with your existing Lender and let your mortgage renew, you won’t have to re-qualify.
|2018 ACTION PLAN
If you plan to BUY this year:
If you plan to SELL this year:
I AM HERE TO HELP
While national real estate numbers and predictions can provide a “big-picture” outlook for the year, real estate is local. And as a local market expert, I can guide you through the ins and outs of our market, and the local issues that are likely to drive home values in your particular neighborhood. If you have specific questions, or would like more information about where we see real estate headed in our area, please contact me! I’d love to discuss how issues here at home are likely to impact your desire to buy or a sell a home this year.