A Seller’s Strike and What It Means For the Market
Across Canada we have seen the number of homes sales plummet YoY, down by -48% in Toronto to -70% in Calgary - what is going on??
Rising interest rates have obviously affected housing affordability for everyone, taking many prospective buyers out of the buyer pool and keeping them as renters which would naturally decrease sales.
But the bigger story is what’s happening on the Seller Side - a “Seller’s Strike”. A seller strike is when sellers decide not to list their properties or even remove them for sale from the real estate market, in order to demand better offers and higher prices. Right now, sellers simply are not getting the price they need to sell and this has led to a 17 year low of real estate listings across Canada.
I’m currently advising my clients that don’t have to sell, to simply hold off until interest rates stabilize this year (we likely saw the last interest rate increase on Jan 25), and confidence returns to the market. Housing demand has been temporarily limited with a historic increase in interest rates bringing uncertainty to the market and limiting the budgets of many buyers. The media is sensationalizing the declining prices as a “crash” and “Nobody is buying Toronto homes anymore” and this has affected the national psyche. The long-term equation has not changed though – incredibly high immigration with a strong desire to own a home in Canada will lead to higher prices long-term.
As long as rates stay high, the “sellers strike” should continue. Expect very low rates of new listings for the foreseeable future but this will naturally pick up in the Spring due to seasonality. Without a strong incentive to sell (like foreclosure), the sellers strike, amongst other factors, should keep pricing stable and I don’t expect to see huge declines from here. Keep in mind that the vast majority of homeowners bought pre-Covid. Most bought at significantly lower prices so their mortgage amounts are much lower and can be carried for a long time at higher interest rates. They have also built significant equity in their homes over the years giving them a further cushion. We are simply not seeing a forced-selling situation like what happened during the US sub-prime housing crisis in 2007-10 where they were handing out mortgages to people with no income and no jobs.
The market is already beginning to stabilize and prices will start to go back up - 500,000 new immigrants coming into the country every year by 2025 need to live somewhere and many inputs for new housing construction have gone up (especially financing costs).
Keep calm and carry on.