The new year seems to have come in strong, at least on the local real estate front. A number of clients have contacted me this month, looking to sell as soon as possible. And I'm helping several clients on the hunt for quality properties.
After a lull in the first half of 2020, the desirable properties, priced appropriately for the day, saw strong demand that continues into 2021. It seems more and more people have decided they can't continue to hold off making a move while the pandemic plays out. They’re doing what they can to get into a home of their own or to make the move to another home. The result? An extremely active market in some sectors, even this early in the year.
I’m advising my clients to sell as early as possible this year, before listing competition heats up later in the spring. And in some cases to negotiate a long completion, which may help to maximize options for their next purchase this spring, when more listings may be available. We may even see a moderation of prices in some sectors, or at least price increases, as more homes hit the market as we move into a post-Covid 19 world. Of course, individual sectors, neighbourhoods and housing types are all dancing to different tunes. Your individual sell/buy scenario will vary.
An issue I've mentioned in the past that remains critically important for both buyers and sellers these days is the ability to finance or refinance their purchase.
When selling, most people still assume they can "port" their existing mortgage to a new property, increasing their mortgage amount if needed. Most however do not realize they'll likely need to qualify from scratch under the relatively new mortgage "stress test" rules. These rules state that a borrower must qualify for the higher of 1) a rate 2% higher than the actual mortgage rate the borrower will be charged or 2) the Bank of Canada’s conventional 5-year rate, currently at 4.79%. These are artificially inflated higher rates at which the borrower needs to qualify. In essence, think of qualifying at a 4.79% rate vs. a 2% rate.
A mortgage rate doubling for qualification purposes has a huge effect on the theoretical monthly payment relative to income and other expenses, and thus the amount that can be financed. Additionally, the borrower's situation may have changed. A different job, a car lease, credit cards, lines of credit, other debt, etc., can make a huge difference to qualification ability. Other relatively new, stricter qualification practices need to be considered and dealt with as early as possible as well. Prior to committing to sell, ensure you fully sort out and confirm your future purchase plans and financing with your mortgage broker or bank. And get it in writing.
Once you've sorted your financing there's no time to waste if a move is part of your plan for 2021. Although a home can be bought or sold at any time of the year, we do see specific seasons of much higher activity – a higher number of listings but also a higher number of buyers. Think of the 2-3 months of spring and the two months of fall as prime time. There are strategic reasons to make moves on the margins of these time periods, however. And right about now is the time to start the process of selling. You may need to spend some time prepping your home for sale as well, which could involve contractors and their schedules, etc. Best to start sooner rather than later. (By the way, if you don't have a copy of my comprehensive Sellers' Guide, which includes advice and checklists to prepare your home for sale, just ask, and I'll send it over to you.)
As always, please feel free to contact me to discuss any aspect of real estate, no obligation.
(This blog posting was originally published as my January e-newsletter. Drop me a line if you'd like to subscribe.)