Hey everybody! With 2022 in the books, we took some time to review last year, and how we fared in the Greater Sudbury Real Estate Market. If you haven’t read that blog post, i recommend giving a quick read!
Looking ahead to 2023, it’s time for me to make some predictions! Now, nobody has a crystal ball, and me least of all… What I am relying on here is my decade-plus of working in the Sudbury Real Estate Market, and my analysis of the market statistics of the recent past, to make educated guesses of what I think the future will hold! Some of these are fairly obvious, while other may be a little bolder!
As I want to get into enough detail with each of them, I have decided to break it down into a 4 part series. This will allow me to go into detail with my reasoning behind each prediction, and engage in discussion about them.
Only time will tell if I am right on any of them!
Although the drop in number of sales is not-so-bold of a prediction… The severity of the drop may be significant. With interest rates remaining high through 2023, a downward pressure will be put on demand, resulting in less homes being sold in 2023.
Interest rates are at the highest I have seen in my career (I was fully licensed in 2010, so in my 13th year now), high inflation cutting into people’s budgets, and simply less money for people to spend on housing. If we throw the cost of rent for anyone who will be a first-time buyer, less and less is being saved. Household debt is increasing for many families, and that cottage property or that step-up home may be a few years out still for many.
I have heard colleagues throw around a 30% drop in number of sales, but I think this is a little pessimistic. That would see sales drop to about 1,350 in 2023. Although most of the necessary forces are there, I don’t think the drop will be as dramatic as that, and I anticipate the drop to be in the range of between 15% and 20%. That would mean the number of residential sales in 2023 will be between 1,600 and 1,750 residential homes. This would be a just below the normal range of what we have experienced over the last decade.
If pressed for a number, I am going to say we will see a number closer to 1,650. My confidence increases the more we approach the lower end of the range I have predicted. That being said, I know from my own buyers than many are motivated to enter the real estate market this year, despite interest rates. They want to get into the market before prices start increasing again, which they will undoubtedly in time.
Another buyer I am encountering a fair bit is the soon-to-be-retired buyer. They are looking to downsize, but not necessarily downgrade. Some may be willing to buy a fixer-upper, but one that offers the space and features they would want. They will take the next couple of years renovating it, in order to turn it into what they want. Others are looking to upgrade to the water before prices get too far out of hand, and their retirement dream totally out of reach.
If enough of these buyers come out of the woodwork, then we could see the final number closer to the higher end of my prediction. Where the former may be a little less choosy about the home they end up buying, the latter will be very picky and will not settle. There will be some of both, but how many will end up affecting which end of the predicted range we end up in.
A number of other factors will have an impact as well. Supply will be going up, so it will be interesting to see how many sellers are willing to be negotiable, and how much. Will buyers throw caution to the wind despite interest rates, and enter the market at any cost with the solace of knowing that interest rates will eventually go down? And what do interest rates end up doing? What effect will the debt ceiling showdown in the US have on an already fragile economy heading to recession? What will the US Federal Reserve do? The BoC will surely have to follow…
There are so many influences, that the future is cloudy for sure! If even half of these take a turn for the worse, sales will drop to the low end of my predicted range. If all go bad, then it’s possible that my colleagues are correct in their predictions of 30%, and sales of 1,350 is optimistic…
My advice to Buyers - Now is your opportunity! Sellers who are motivated to sell will have to concedes. Despite high interest rates, you may be able to buy at a discount, and go the route of a variable rate mortgage. It will mean some small sacrifices today, but you can always lock-in your rate once rates eventually go down. But, as always, speak to your mortgage professional first, and make sure this is the right way to go, and in-line with your medium-to-long-term goals.