For the last couple of years, much of the Canadian real estate market has been tilted in favour of sellers. More recently, the pendulum has swung toward buyers amid slowing sales activity, moderating prices, and broader economic uncertainty.
Although there is still a considerable national housing shortage, half of Canadian housing markets could shift toward a more balanced market.
What is a Balanced Market?
There are three types of housing markets:
- Buyer: There are more homes for sale than buyers.
- Seller: There are more buyers than there are homes for sale.
- Balanced: The housing market has reached a state of equilibrium, meaning that supply and demand are equal.
According to the RE/MAX 2023 Housing Market Outlook report, more than half (55 per cent) of markets will be in a buyer’s or balanced market this year, a surprising reversal from what many Canadians have seen since the beginning of the coronavirus pandemic that saw an enormous buying frenzy.
“It’s good see the majority of markets moving toward more balanced conditions, which is typically defined by 45 to 90 days on market. This is a much-needed adjustment from the unsustainable price increases and demand we saw early in 2022,” said Christopher Alexander, the President of RE/MAX Canada, in a statement. “Many Canadians have understandably expressed hesitancy about engaging in the real estate market early in 2023, in the wake of rising interest rates and broader economic uncertainties. However, despite this, a greater number of Canadians consider real estate to be a solid long-term investment compared to this time last year.”
So, now that conditions have ostensibly stabilized, how do you purchase a residential property under balanced market conditions? We have compiled a guide to help you get started.
How to Buy Under Balanced Conditions
Here are seven tips for buying under balanced market conditions:
#1 Stay Within Your Budget
The first thing any buyer should do when planning to buy a property is to have a budget. This is a crucial step before beginning a search for properties. Buyers need to possess a clear idea of their financial standing and should be aware of what they can afford in terms of how much down payment they can make and how much monthly mortgage payments they can handle.
#2 Market Research
Be it a buyer’s or seller’s market, prospective homeowners need to know the market where they intend to buy. Understanding market trends and dynamics is extremely important so buyers do not end up overpaying or buying a property in a bad neighbourhood or location with low resale value. Research is critical for making informed decisions. This is even more important in a balanced market, as other people may want the same property. By knowing more about the market trends and dynamics, you can make a more attractive offer for a property you like.
#3 Work with a Real Estate Agent
Buyers benefit from the services of a real estate agent because these industry professionals have the necessary knowledge and experience to understand and navigate market conditions and find a property that fits a buyer’s budget and personal preferences and requirements.
Indeed, a significant advantage for buyers is that real estate agents do not charge buyers a commission. The seller handles that component. Real estate agents act like influential middlemen by connecting the right seller with the right buyer. They get their commission from the seller, the seller gets the sale, and the buyer gets a property that fits their needs.
#4 Don’t Be Rigid
While it is true that customers often have the upper hand in buy-sell situations, it is also correct that both buyers and sellers have many options in a balanced Canadian real estate market. As a result, negotiations can be crucial in making or breaking a deal. Ultimately, be flexible if you think a property is the right fit for you. This does not mean you should give in to all the demands of a seller, but you should be flexible enough to be open to negotiating the property price, closing costs, and other related terms and conditions.
#5 Pre-Approved Mortgage
Often, buyers fall in love with a property, have their hearts set on it, and start the mortgage approval process afterward. This can sometimes end up causing major disappointment. It is a good idea to get pre-approved for a mortgage first. This can help avoid unnecessary surprises and show you how much you can afford and what offer you can put on a property.
#6 Location Matters
Buyers need to push location to the top of the list of essential attributes during the home-buying process. Before deciding on a property, consider the surrounding neighbourhood, schools, amenities, and transportation. This not only affects you when you become the new owner but can also be very useful if you decide to resell the property later, as properties with a good location tend to have high resale value. Sometimes, buyers make the mistake of settling for an inferior location for a low price. This might seem a good idea at the time, but it may not work out so well in the long run.
#7 A Professional Home Inspector
During the 2020-2021 housing boom, there were many reports of homebuyers abandoning the services of home inspectors so they could close the deal sooner. This is a mistake, no matter the real estate environment. Having a professional home inspector assess the property’s condition is essential. This is another crucial step, as home inspectors can identify potential issues that need to be addressed before any deal is made or any papers are signed. In addition, home inspectors are trained to identify problems that a regular layperson would not even consider. Ultimately, seeking the services of a reputable and experienced home inspector is vital before making any offer on any property.