Why buyers balk

Geoff lives in East Van. A doctor. His squeeze is an accountant.

“We’re the kind of people that could buy in this moronic city,” he says. But they don’t. Instead they’re happy, wealthy renters. More satisfied with life, for sure, than the stressed realtor who showed up at their door this week.

Here’s what he told me.

Just now, while making dinner I saw a door to door knocker go up the other side of our street.  Eventually, of course, he made it to my door.  Doesn’t look like a Jehovah Witness…definitely not a student wearing the vest of a charity….what will this be?

“Hello, I’m the real estate agent for the new duplex builds down the street and around the corner.”

HOLY SHIT.  I had just got back from coffee with a friend and was telling how half a dozen new duplexes on our street are still unsold.  Yep, that is definitely he guy from the signs.

“We are dropping the prices and having an open house this weekend. If you know anyone in the market would you please let them know?”, he said as he tried to politely hand me a flyer. He did a pretty good job of not appearing (too) desperate.

He then commented on the nice build I am in and if I had built it.  Nope, renter, the building couple divorced in 2021, sold it to our landlords who rented it out immediately.  We have been here three years.  I didn’t add that I was very happy to be a renter.  He looked so sad, I could not say our balanced and diversified portfolio made $470K in the first 8 months of the year.  Even though my brain was screaming that.

Door to door real estate agents.  In Vancouver.  Telling you they are dropping the price. Mind blown.

Will crashing rates save this poor sadsack realtor? How about Chrystia’s big come-‘n-get-em mortgage changes?

In reality, the current situation is making things worse for (almost) everyone. It’s a classic example of how incompetent politicians clash with human foibles.

Numbers released this week by CREA confirm what we can all see. House sales are languishing and buyers are balking, despite three Bank of Canada rates cuts. Listings are growing. The months of available inventory is swelling. The sales-to-new-listing ratio is pathetic. Prices have dropped a little and are now stuck on hold.

But mortgage rates have tumbled dramatically from over 6% to the 4% range. Buyers have tons more choice than six months ago. There are more price reductions than over-asking sales. Bidding wars are kaput. Purchasers have time to ask for home inspections and utility bills. Conditional sales are a thing again – with offers hanging on approvals from a lender or a lawyer. And as we detailed recently, lots of them are valid only if a buyer’s existing home sells. Two years ago any listing agent would have dismissed that deal out of hand.

So why – despite stupid prices that aren’t really budging – are people staying away from the market in droves?

Home sales lagging for the past two years

Source: Canadian Real Estate Association

As stated. Human nature, and government actions.

First, we all know rates are coming down. Three cuts in the bag, but many more to come. The Bank of Canada will reduce the cost of mortgages again next month, then in December, and thereafter twice more prior to the spring housing market. So folks figure they can wait to get a 3% mortgage in April instead of a 4.4% loan now. That will materially increase their borrowing power, allow them to buy more or lower monthly carrying costs.

By the way, the Fed’s big half-point cut yesterday is a further signal that monetary policy is getting looser everywhere and will continue as CBs struggle to keep economic growth alive. If the US election goes awry – or the country smoulders after the vote – expect much more.

Second, buyers are waiting for prices to fall – convinced a swelling of listings is the harbinger of cheaper homes. Add to it the desperation of realtors who are starving (like the East Van dude) and the burgeoning condo crisis is places like the GTA and YVR, and the meme now is that real estate will crack. Reality or hopium?

Third, by bringing in 30-year amortizations, sweetening the RRSP homebuyer’s plan and mushrooming the CMHC price cap to $1.5 million, Ottawa is basically icing the market until Christmas. The big changes come into effect December 15th, when the real estate traditionally freezes. So why wouldn’t buyers be inclined to wait until financing is cheaper and easier, minimum downpayments are lower and the snow is melting?

So, paralysis.

The question is, will FOMO return and prices jump as 2025 dawns? Would failing to buy aggressively now with a closing date in late December be a missed opportunity? Will sellers be less cocky or anxious come the spring? Will realtors become rock stars again? Will bidding wars, bully offers and competition ensue?

The best advice is this: don’t try to time the market. Nobody knows what comes next. If you really need to own a house and can afford it without risking your family or gutting your finances, go ahead. Otherwise, rent with pride.

Remember Geoff. No flies on him.

About the picture: “Hi Garth, here are pictures in answer to your call for dog photos,” writes the poster known as Phil Indablanque. “This is Shiva, Thistle and Clover enjoying the freshly laid (dog resistant) flooring. I’ve been following the blog (but rarely posting) for a dog’s age and the sound advise you offer has been helpful. Thanks for providing a sane place to share opinions.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.