Has The Local Real Estate Market Cooled Off?

It's hard to tell from the unseasonably warm weather, but we are a couple weeks into the fall season. The autumn real estate market is well under way and even if the weather hasn’t cooled off yet, our local real estate market (Windsor, Ontario) is certainly feeling a drop in temperature. Today we are going to discuss a few of the factors that have led to this cooling.

Sellers Have Adjusted Their Prices Upwards

This makes a lot of sense. We had a pretty crazy first 8 months of the year. Multiple offers were everywhere, properties were selling considerably over list price and it was a great time to be a seller.  As this continued, the market adjusted and realtors and sellers began to adjust their prices to these new comps. As prices increased, demand levelled out to a more balanced market place.

Interest Rates Were Raised A Couple Times

The Bank of Canada (BOC) has now increased the benchmark interest rate two times this year, for a total of 50 bps (0.5%). Although this is a minor increase, it has affected affordability and how much house a buyer can qualify for.  The BOC seems to be indicating that they are also planning further hikes into 2018. This has led to a modest softening in demand.

Trickle Down From The Toronto Market

After a series of measures introduced earlier this year to slow the housing market, the government seems to be finally succeeding. Sales are way down, prices are stalling and deals signed in the spring are running into snags at closing. A large segment of the demand in our market was coming from Toronto buyers who were relocating and/or investing in our market. Suddenly, properties that used to sell in a few days are sitting on the market for a couple months. Because of these developments, this pool of buyers has seemed to slow and put a dent in demand.

General Uncertainty

There seems to be lots of bad headlines out there right now: the Liberals are planning to change the taxation of professional corporations; anything Trump related; the US, Canada & Mexico are renegotiating NAFTA; North Korea’s nuclear program; hurricanes causing havoc; flooding (which we experienced locally); and terrorist attacks. Uncertainty is never good for markets. Markets operate on confidence, which is sometimes a fragile thing. It's difficult to quantify how much confidence is shaken by these types of events, but combined with the above factors, it probably has some impact on demand.

Sometimes it's hard to figure out cause and effect in markets but those are some of the factors we see cooling our local market. What are your thoughts on this subject? We’d love to hear from you.