Is this spring the start of a fresh real estate market?

It feels like the home stretch into spring has been particularly refreshing this year, doesn’t it? After 3 Marches in a row of less than stellar news (germs and rate increases and recessions - oh my!), the promise of some warmth in the air and the real estate market is being welcomed with open arms.

But with the market picking up speed and prices increasing for the first time in nearly a year, how will this new market moment impact prospective buyers? Let’s discuss!

Is this a market shift or just spring fever?

The real estate market across Canada has been nothing short of a bumpy ride over the past year. With prices falling by as much as 20% in the wake of steep rate increases by The Bank of Canada and the rising cost of just existing, we’ve all gotten pretty used to the cycle of high rates, low prices, and a real estate market at a relative standstill.

But spring is the season of renewal and historically ushers in a warmer housing market. For the past 3 years, however, spring has brought a bevy of new challenges, from a little germ that faithful March to the start of a rate increase cycle the next.

This spring, consumers seem to be regaining lost confidence thanks to relative calm on the rate front and returning to their house hunts. And as competition has become tighter for the still lacking inventory available, prices have started to come back up. In April, the national benchmark MLS price was up 4% month-over-month from April and, at $686,371, was the highest it has been since May of 2022.

Is this market here to stay?

While prices starting to creep up has been welcomed news by homeowners who have been waiting to sell, it’s definitely put some fear in prospective buyers who’ve been waiting on rates to drop. But have you missed the boat if you didn’t buy while prices were down? Not likely. We’re not expecting to see a huge, sustained price increase for longer than these warmer months - here’s why.

First, it’s important to remember that in a balanced, healthy market, we expect to see a temporary price surge - we just haven’t seen it for a few years. Generally, the spring market warms up because the process of house hunting in warmer weather is just more enjoyable! Curb appeal increases with gardens in full bloom, and open houses are much smoother without muddy winter boots. For the past few years, the forces that propel the spring market have been no match for a global pandemic, skyrocketing rates and record-breaking inflation, but in normal market conditions, a little bump in the market like this is precisely what should happen. Then, typically, we’ll see a drop again in the fall. Since this spring seems to be returning to relative normalcy, it’s safe to assume the next steps in the cycle will as well.

Plus, demand is still far outpacing supply. Experts speculate that many would-be buyers are sticking to the sidelines, waiting to see if prices increase further before listing. So we are seeing an increase in multiple-offer scenarios, bidding wars and increased market tension into summer. This could see more price increases throughout the summer, but experts tend to agree that we aren’t likely to see any sustained increases until rates come down further and inflation proves itself under control.

The Edmonton Market

The April average sold price for a detached home in the Edmonton area was $485,739 - up 5.7% over March, marking the first increase we’ve seen in close to a year. So what does could mean for you if you plan to buy this summer? Let’s look at one example.

List price: $485,739
Down payment: $24,287
Rate: 4.45%, 5-year fixed
Amortization: 25 years
Annual household income required: about $110,000

Making your money go further

There is one simple hack that we are seeing more and more first-time buyers employ that is helping to increase purchase budgets, stretch household incomes further and even put some cash back into buyers’ pockets - income suites. In the past, we’ve found that many first-time buyers shy away from properties with income suites - maybe because of the added responsibility of becoming a landlord? Or due to the dream of that elusive single-family home? But as the cost of living have ballooned in recent years, opting for a rental property inside of your home has become increasingly popular - and the math should tell you why.

Let’s look at that same example from above. A detached home for around $485,000, but this time there is a two-bedroom suite that you can charge around $1200/month rent for. This addition could not only support most of your mortgage payment but also cut your required annual household income down to about $100,000 or increase your purchasing power so you can broaden your house hunt horizons.

Plus, many of our amazing lenders will remove the costs of utilities and taxes from your debt-to-income ratios when purchasing an owner-occupied rental property. And while many lenders will use 50% of your expected rental income to qualify, some may use up to 100%! Stronger debt ratios and more potential income mean increased borrowing power, a potentially more significant budget for finding that perfect property and even the potential for a better rate.

The moral of the season

So what does all of this mean for you, exactly? It all boils down to what we say all the time around here - that timing the market is impossible and trying to do so almost always leave you feeling left out in the cold. Instead of worrying about what has happened or what’s to come in the market, focus on what you want, what will be best for you and your family and what will help you create the future you want.

And of course, remember that your Happiness Creators are here to support you through every step of the journey, no matter what it looks like for you! Head to the link below or give us a call to get started.