Buyer’s remorse is common these days when it comes to Real Estate in parts of Ontario. There was a surge in prices from December 2021 through to the end of March 2022. The pandemic had a huge impact, obviously. People were looking for homes that were set up for them to work from home, work out from home, socialize and entertain in, as they couldn’t go out and sometimes moved to other cities and provinces to do so because of the affordability outside of their area.
Due to demand being driven by lack of inventory and the fear of interest rate hikes many strong offers were made that aren’t all supported by appraisers and weren’t’ recognized as true market value for the home. Some Buyers made decisions that they are now regretting as house prices and sales start to cool. Some Buyers are having difficulty fulfilling their obligations (interest rate increases caused some Buyers to no longer qualify for their past purchases that they have yet to close and for some not getting enough OR not being able to sell their home after they unconditionally purchased). As a result, they aren’t qualifying anymore for their purchase price as they don’t have enough down payment/equity to move forward. Some people are being called back to work and don’t want to make the drive anymore from the small communities or more remote areas where they purchased. Some aren’t enjoying the change and are looking to head back to the areas from which they originally came.
Trying to get out of the deal is not easy, and Buyers are liable. They risk losing their initial deposit and also civil litigation that can occur over the difference when that home finally sells again. This can be very costly to Buyers. There is currently a lot of pressure not only on the Buyers but also on Mortgage Brokers/Lenders and Lawyers who are trying to guide and advise and assist Buyers now who are feeling this remorse or who are no longer in a financial position to close the deal.
The Kitchener Waterloo Association of REALTORS® reported the following in their June 3, 2022, media release:
Total residential sales in May included 404 detached (down 16.7 per cent from May 2021). In May, the average sale price for all residential properties in the Kitchener-Waterloo area was $875,194. This represents a 18.3 per cent increase over May 2021 and a 3.5 per cent decrease compared to April 2022. The average price of a detached home was $1,016,834. This represents a 17.0 per cent increase from May 2021 and a decrease 4.2 per cent compared to April 2022.
We are starting to see things cool a bit in our area as the number of sales is down from May of last year; however, the sales prices are still significantly higher than May of 2021. The market appears to be healthy still. It is not crashing. This is economically a strong area of Ontario, and we may not see the drop in prices and sales like some areas of Ontario may whose prices rose dramatically during COVID-19. People still need to buy and sell homes.
If you are a Buyer and you are pre-approved at the rates now and can afford to get into the market, now may be a great time to do so still. There is more inventory on the market and less competition for the same home. Home inspections and the inclusion of financing and sale of home conditions in the agreements of purchase and sale will start to be commonplace again and will provide more protection for the Buyer and piece of mind.
There is talk of another interest rate hike so if you are out there looking to actively buy, then speak to your mortgage broker/trusted financial advisor about all the hypothetical situations that can occur in the next half of the year. Should you lock in your current rate? Will you be able to purchase still, and at what price if predictions are correct and the rates rise again? If you have a house to sell, should you put it on the market now with a longer closing so that you know what you have to work with financially to move forward with a purchase, as this could give you peace of mind and buying power.
There is a lot of uncertainty, so working with a trusted REALTOR®, licensed Mortgage Specialist and/or Financial Advisor, Accountant, and Lawyer is important when navigating during these times. Their advice and guidance are based on their professional experience and knowledge, and they are there to help.