So, what is the market like now that life is starting to return to normal?
It has been just over 90 days since the government started announcing widespread closures of schools, borders, businesses, recreation facilites, places of worship and parks and playgrounds. Life came to a grinding halt for the majority of Canadians and given the information we were receiving from the media, it was hard not to worry that a real estate market crash was in the works. Buyers became incredibly uneasy and scaled back their searches while sellers, equally nervous, either took their properties off the market or implemented screening and sanitizing protocols. The spring months are a time when we typically see the most new listings hitting the market and buyers are hungry to snatch up the perfect property they have been waiting for, but that was not to be in 2020. Interestingly, the savy investors who thought it would be a good time to score a deal on a Canmore condo often had their hopes crushed by the ever-confident property owner willing to ride out the storm. "Lowball offers" were shot down as quickly as they were received and while there were a handful of hotel-type investment condos that came on the market at a discounted price, sellers who did not account for the market conditions were steadfast in their belief that everything was status quo.
Restrictions are now starting to ease and small mountain towns are grappling with the idea of welcoming back visitors. At the start of the pandemic many townsfolk pushed for measures to limit the amount of travellers coming in to town out of fear of spreading the virus however, they quickly noticed that many of their livelihoods are also connected to tourism dollars. Upon re-opening, the town made the decision to close off Main Street to vehicle traffic to give pedestrians the chance to practice safe social distancing while still visiting the various shops and restaurants which, was a welcome move by many. It wasn't long after businesses were allowed to open that property owners started to think about listing their homes again. The amount of new listings hitting the market suddenly exploded and in the first 2 weeks alone there were 55 new properties on MLS which, may not sound like a lot but we are talking about a small town with only roughly 450-500 properties changing hands each year.
June is typically the busiest month of the year for real estate transactions closing. Given the timelines that are in place during a real estate transaction these are sales that most likely actually took place in April or May. In June of 2019, there were 55 sales of homes in Canmore and this year there have been just 16 closings at the time of this writing. While there is still a week left to count in the statistics, we are currently looking at an approximate 71% decrease in sales compared to last year.
The pandemic was something that many of us probably never imagined was possible in our lifetimes and highlighted some fundamental problems in our society. Canadians in general are highly indebted in part due to the high cost of real estate in our country. The government was quick to realize that if all of a sudden a mass amount of us were not able to make our mortgage payments, the financial system could potentially collapse. Some of the earliest measures introduced were mortgage payment deferrals as well as the federal CERB program that got money into the pockets of those who needed it, fast. As the weeks went by the Canadian Mortgage and Housing Corporation, who insures mortgagees with less than a 20% downpayment, introduced their plan to make it more difficult for those borrowers to qualify. Starting July 1st, buyers with less than a 20% deposit will be required to have a better credit score (680) than before. In addition, buyers will no longer be able to use gifted funds (from their parents, for example) as a downpayment. They will also be required to have less debt in relation to their income at 35% where in the past they could qualify with 39%
In the end, the real estate market in Canmore wasn't hit nearly as badly as many thought. Going forward I expect that prices will remain flat at the lowest and higher price points this year while properties in the most desirable category, the $500,000-$600,000 range, may see some small growth. This is because the entry level buyers are going to be impacted hard by the new mortgage rules on the low end and at the higher end of the spectrum, buyers in the $1,000,000 range may simply be less likely to invest in that second home this year. As always, where there is lack of growth, there is opportunity and buyers in those segments may in fact be able to score themselves a "deal" this year.
Posted by Ben Maize on