How Has the Market Shift Impacted Your Home’s Value in Sudbury?
Many homeowners in Sudbury worry about recent real estate headlines and talk of home pricing declines. You may wonder, "Will the value of my home plummet?" — especially if you plan to sell your home in the coming months.
You might also wonder if real estate market conditions are so bad that you won't be able to sell at a good price. Should you hold off selling altogether and wait for better times to return? I can't tell you how many sellers I've talked to that say they are going to wait until the spring to sell their home (with the thought that the market will be back to normal by then).
It's worth examining these conditions in more detail. Let's dive into what's really happening to Canadian real estate beyond the sensationalist headlines.
Why Deceleration in Home Pricing Does Not Mean Depreciation in Home Values
There’s no question that the real estate market of 2022 differs from 2021. Last year was record-breaking for the Canadian real estate market, surpassing the previous record for all-time highest home sales by 114,000 units. The high demand also caused home prices to soar, increasing by 26.6% by the end of the year.
Yet, as interest rates rose and Canadians faced the realities of a post-pandemic economy, the market shifted. Although prices remain high, we began to see consistent month-over-month price declines in 2022. In late spring, houses sold below their list price by as much as $200,000 – a headline that would have been unthinkable in 2021.
Does this downward trend in home price growth signal a depreciation in home values? The great news for sellers is that it does not.
The main difference between home prices and home values is that home prices fluctuate over the short term, depending on economic forecasts and unforeseen circumstances that influence the economy. On the other hand, home values fluctuate much more slowly over longer periods. A home price is the price buyers are willing to pay for a home due to several variables.
A home value is more stable over time, depending on the size and type of house you have, its condition, and its location. Home values in some areas will be relatively impervious to short-term economic shocks, while less economically stable areas may experience more significant fluctuations during challenging times.
Hiring an experienced local real estate agent will help you determine how much the current conditions might affect your home price and whether you should sell right now or hold off for a few months.
Why 2022 Is Not as Bad for Home Pricing as Everyone Thinks
The past three years illustrate this point perfectly. Home prices rose at unprecedented rates during 2021 mainly because no one was selling during the Covid shutdowns of 2020. Pent-up demand for homes combined with a decimated inventory of for-sale listings caused home prices to skyrocket to levels never seen before. There weren't enough homes going around, leading to a buyer frenzy.
By contrast, 2022 has been a relatively tough year for the real estate market. Canada’s economy is slowing due to several factors, including rising living costs, inflation, and mortgage interest rates, making housing less accessible to buyers.
However, it's crucial to put this slowdown into a longer-term perspective. If current real estate market conditions are compared to other years in the past decade rather than the outlier year of 2021, things begin to look less alarming.
To put things in perspective, the national average price for homes sold in September 2019 was $515,500. The national average for September 2022 was $640,479. It’s important to note that while the market is slowing down, home prices are still increasing. And although this year is not 2021, home demand remains strong.
A little more context on local sale prices: the average sale price of residential homes in Greater Sudbury for 2021 was $403,597. Because of some really strong prices in the first quarter of this year, the average sale price of residential homes for 2022 (year to date) is $479,263.
Values have definitely pulled back from the market highs we saw in February and March of this year. And if you bought at this time, I hope you've been able to build some sweat equity or have a good down payment. Hopefully, most of the people that bought are in a position that they don't need to sell anytime soon and can weather any kind of dips or peaks in prices. It is interesting to note that buyers who bought at those high prices are paying less money towards their monthly housing costs than buyers buying today; even with the nearly 20% pull back in prices. This is due to much higher interest rates in the current marketplace versus what buyers were qualifying for in the first quarter of this year.
The Housing Market and Your Home
So, "Will the value of my home decrease?" No, not anytime soon. While you may need to adjust your home pricing expectations as a seller, there is still high demand. In 2022, you will still profit from selling your home because of rising home values.
Contrary to alarming news headlines, the housing market is not about to collapse. When you work with an experienced real estate agent, you can price your home realistically in a way that still benefits you.