Hang in there: there’s reason for hope
We’re in the midst of what is usually the busy summer home-buying season, but if your home happens to be for sale in the summer of 2015, you’ve probably noticed what sellers and agents across the city have been noticing: the Ottawa summer market has been a little sluggish, with not as many showings and potential buyers as sellers would like.
If you happen to be a seller, I know this has not been easy, but there is a bright side and signs of light at the end of the tunnel. Judging from what I’ve been hearing from buyer clients who will be re-settling in Ottawa, I feel that we will see a wave of sales in the coming months, in the period that has traditionally been a slower time of year.
As I’ve been explaining to my seller clients, there are several factors behind this slow-down that are beyond our control. We all just have to recognize the factors and try to work around them.
As I mentioned in a recent column, and as the Ottawa Real Estate Board reported when it announced sales numbers for the region in June, Ottawa this summer is in a buyers’ market. There are many more homes and condos for sale than there are buyers who are looking.
As I write this column in early July, there are 8865 residential units and 2320 condos on the market in the Ottawa area (not taking into account private sales and newly built or to be built homes). This is a record number for sure and some of the highest number I have seen in many years .
That’s great news for buyers. If you are shopping for a home, you can be selective and you’re likely to get a property for a better price than you would if we were in a sellers’ market.
If you are selling, it means you are competing with many other sellers to attract potential buyers. With that competition, you have to ensure your property is in pristine, turnkey condition, and you have to price realistically, according to what similar homes in your area have sold for in recent months. With buyers able to be selective, you might have less negotiating room when it comes to offers.
That’s always the case in a buyers’ market.
But there are additional factors unique to Ottawa that have changed the usual timing of sales in this area and are at least partly behind the slower summer sales.
Ottawa is a government city, and as we all know, a large part of real estate sales in our region are generated by government moves when employees are transferred to our city.
From buyer clients of mine who live in other cities or countries and are awaiting a move to Ottawa, I’ve been hearing about cost-cutting changes in policy that particularly affect those who are moving to Ottawa from far afield.
In the past, foreign service officers (DFAIT), employees of the R.C.M.P. and National Defence employees were able to come to Ottawa to look for a house several months in advance of their move. For example, if a couple based in India were going to be starting a post in Ottawa in July or August, they would be flown to Ottawa in April to look for a home, stay a week or so and then return to India before coming back to Ottawa.
These people would purchase a home in the spring, allowing the sellers to also plan their own move, creating a domino effect.
From my clients, I’ve heard that this protocol has changed, with cutbacks in the spring budget for federal funding in various departments. This has affected the market throughout the city, from condos to luxury homes.
The new approach, particularly for people coming to Ottawa from a great distance away, is that they are now expected to move to Ottawa near the beginning of their new job posting, and stay at a short-term rental or hotel suite while they look for their new home. They purchase that home after they have arrived in the city and are beginning their new posting.
These buyers typically used to come in April or May and would have a closing date in July. With the changes,I’ve been told the relocations are sometimes happening in late July, August, and even as late as September, when these people will be arriving in Ottawa to begin their new jobs and find a new home.
This means that instead of the big spring market that we’ve traditionally had, that market of re-locating employees will now be spread over a few months later in summer. In my case alone, I have heard from at least a dozen buyer clients who are based abroad and are in this situation. These people had originally thought they would be coming house-hunting in the spring, and have told me they won’t be coming to Ottawa now until closer to starting their new posts.
There are some 320 people who work in my office, and we are all seeing that our clients who are moving in from out of town are coming to the city in late July and August. It’s unusual, but I have asked the experienced agents who, like me, have been in the business for a long time, and they have all said they’ve been hearing the same thing.
Aside from changes to government transfers, another factor has been the change in mortgage lending rules.
Banks have tightened their rules recently, so it has become more difficult to purchase a new home without having sold your previous property.
At one time, it was common for people who were moving to Ottawa to use the equity in their current home to buy a new home in Ottawa, even if they had not sold their current home. The market was more brisk and these people were confident they could sell their home in time for the move.
This was actually the norm a few years ago. But qualifying for a second property is now more difficult. Banks are more cautious, and are often not allowing people to purchase until they have sold their previous property.
So those people who are hoping to move to Ottawa are often needing to wait until they have sold their home before they can look for a new home in our city.
So what will the next few months bring?
If you are a seller and are feeling frustrated, I completely understand, but I would encourage you to hang in there, as there seems to be a wave of buyers yet to come.
The mortgage interest rates are still very attractive, and there are buyers out there who want to purchase, but have to sell their current home before they can do so.
And those government workers will be shopping for homes, but just a little later than they did in the past.
So we are all hoping and expecting that the market will pick up over the next few months.
If you have any questions, feel free to give me a call or drop me a note. I will be happy to go over our plans for marketing in the next few months, as we tap into the new market of potential buyers.
You can reach me through my website, at nancybenson.com, where you can also view my current listings.
You can also reach me by calling my office at 613-788-2556.