Invest Now or Later?
You know optimism is returning to the region when every third or fourth phone call we receive is a question about investing in real estate. So is it a good time to invest or make a trade? Let's examine some of the indicators and you can decide for yourself.
In April, 129 properties sold out an inventory of 905 in the region. The total number of sales was 61% greater than last year at this time, with the year to date trades up 21% to 25% when compared to the same month in the previous two years.
Take the good news when you receive it! However, even if there were no new listings it would still take approximately seven months to "clear the shelves" of our present inventory. And of course, when sellers who were unsuccessful last year see Sold signs in their neighbourhood, they re-enter the market. Last week alone saw 20% more new listings than sales.
When you have more inventory than buyers, there is pressure on both prices and length of time on market. The indicator that bears that out is the number of price adjustments received; right now, about 3% of current listings are adjusted downward each week. So it appears to be still a buyer's market in many of the categories.
There is risk in generalizing however. One needs to look at segments of the market that are more active than others. Almost half the residential transactions last month were in the under $250,000 price range, or what is commonly referred to as "starter homes". Of course the owners of those properties were displaced, and likely traded up in the same community or out to an acreage.
Properties suitable for "fix and flip / fix and rent" are flying off the shelf. There have been some excellent opportunities over the winter for investors possessing the skill set and initiative to make this work, but I expect the demand will soon outstrip the supply.
These trends are prevalent across all communities in the Midwest, which again I interpret as a healthy beginning to an economic recovery. There are some risks that must be considered. If the progress being made is national, but seen as too soon or too fast by the federal government, then we can expect interest rates to rise in an attempt to manage both growth and the value of the Canadian dollar. As the price of oil climbs, there will be an immediate trickle down effect on the price of transporting both goods and people. Offsetting this of course in our region is the positive effect on employment and commercial enterprise by an increase in the production side of the oil and gas industry.
So is now the time to invest or to trade up? Opportunities still exist for buyers that have their financial ducks in a row, but like ice cream on a warm summer day, if you hesitate, it won't wait for you to make up your mind, it will just simply disappear.
Vern McClelland is an associate broker with RE/MAX of Lloydminster and a partner with The Midwest Group. If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the website www.wesellmidwest.ca
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