Friday, October 6, 2023

So many people are wondering what is ahead in Ottawa’s Real Estate market. There is no crystal ball, and the reality is even the most seasoned professionals can’t predict the future. I’d love to encourage you to be certain that regardless of what happens, there are always real estate opportunities – no matter the market. 

You likely know the stock market saying “when everyone else is selling, it’s time to buy? And when everyone is buying, it’s time to sell?” Investing in real estate, whether as your first home or as one of many, works by similar principles. We can always find gems and we can always make changes that are best for our family. The key is to focus on what we do know and what we can control, rather than obsessing on the unknowns of a market we can’t control.  

What We DON’T Know

Here is a breakdown of some of the unknowns that may have you in paralysis: 

• Interest Rates: Are they going to go up or down? This is something no one can accurately predict. We are in uncharted territory post-COVID. Months ago, many economists were predicting that by the third quarter, we would see a softening on interest rates. Or it might not happen until the first quarter or first half of 2024. Now, other economists are saying we might see rates hiking even higher. 

• Future government incentives: We don’t know if in the future the government will bring new policies to help first time homebuyers to boost the economy. 

• The future dollar: We don’t know the value of what the future dollar will be. We don’t know how affordable gas, groceries, and housing prices will be.  

What We DO Know

How do you plan for what you don’t know? This is where many people enter a state of mental paralysis. Unfortunately, in life there will always be unknowns, and we still have to do our best and plan anyways – knowing we’ll have to make some adjustments as we go. As a leader in the Ottawa industry, Ken has access to the stats, the charts, what the economists and other leaders are saying. The Dekker Team has a strong feel for where the market has been over the 30+ years Ken and the 35+ years I have been in the industry. Ottawa’s market is one of the most stable in Canada, and we have seen time and time again that it has fundamental patterns you can always count on.

Here are some basic facts that we can be sure of:  

• Demand: There is a lag in demand for purchasing homes. Does this mean less Canadians need or want a home? Nope! With increasing interest rates and housing prices, many are sitting on the sidelines waiting to see what will happen. This is an affordability question rather than there being a decrease in demand. 

• Immigration: It’s not slowing down. Government policies suggest it will be a constant in our future, ensuring a continued demand for housing in Canada, particularly larger cities like Ottawa. This demand spans a wide spectrum, from rental apartments to larger family homes.

• Young Adults: A very large group of individuals aged 25 to 40 are looking to enter the real estate market. This age group wants to either purchase their first homes or seeks larger residences for growing families. Many are stuck in a holding pattern and have begun seeking alternative living arrangements, such as cohabiting with family or purchasing generational housing with relatives. 

• Baby Boomers: The baby boomer generation has more wealth built as a whole than previous generations. Many are choosing to age-in-home, remaining in their home and hiring out help for things they can’t do like lawn care and cleaning. However, we still have many who are going to be looking for affordable rental units and senior living arrangements.

• New Builds: The government is all for building more homes as they know there is demand; however, with the increased building costs and interest rates, builders are finding it challenging to make a profit. In the past 5-6 years, there has been almost no inventory left on the market; builders could sell almost all in the pre or mid building stage. Now, we’re seeing inventory homes sitting on the market, with builders having to adjust their pricing to see them go and fewer starts are taking place.

• House Prices vs. Interest Rates: We can figure out what will happen to house pricing depending on which way the interest rates will go. Recently, I had a consultation with potential sellers. They said, “We have another place to go to. We could sell now, we could sell in the spring, what do you recommend?” And I said, “Well, here’s the thing. If interest rates go down in the spring, then prices will go up because the demand is still high.” As we mentioned above, even though less inventory is selling, many people still really want to buy homes. But if rates continue creeping up, house prices in the spring will be going down. Whichever way they go, it is likely that there will be nominal fluctuations. If you are buying, the equity you have built between now and then, combined with the fact that you are hopefully buying and holding for years, and the fact that there is more inventory on the market right now, means the ideal time to jump could be now.  

TAKE ADVANTAGE OF WHAT YOU CAN CONTROL

Unfortunately, we’ll never be able to control the real estate market. Let’s focus on what we can control: Ourselves and our choices. 

• Financial Choices: We CAN make wise financial decisions, including managing spending and debt. So often I hear people say, “We can’t afford that house.” I used to say that when Ken and I first got married; I felt I couldn’t afford whatever I wanted, regardless of what it was. Ken and I eventually came to realize it wasn’t the mortgage and interest rates that were the problem – it was the student loans, car payments, and all the discretionary spending debt that was strangling us. And this was back when interest rates were MUCH higher than they are now!

• Earning Potential: We can control to some extent our paychecks based on our career choices and the opportunities we strategically seek out. 

• Credit Rating: Being intentional about looking through our credit score report, checking for inaccuracies or mistakes, and working to keep the score high is something only we can do for ourselves. We have many tips on how to improve your credit in our LIFE’s Inside Track episode Blind to Your Investment Potential? You can check it out on our April 21, 2023 recording. 

• Housing Choices: Rather than waiting for a larger amount to buy your dream home, why not start leveraging what you already have? If you don’t qualify for a mortgage at the price point you want, perhaps you can partner with someone you trust to build equity on a different property in the meantime. 

If you are a young couple, this may mean buying a fixer-upper duplex with another young couple and putting in some sweat equity while sharing expenses. It might involve crowding into a smaller space than what you were formerly renting. And is it worth the discomfort? Likely Yes! 

If you are single, perhaps it’s time to stop renting an apartment and move into your parents’ basement. Perhaps you can pay them a smaller amount of rent and save the rest you previously spent on rent for a downpayment. Sometimes, it’s better to be uncomfortable financially in the short run so we can get ahead financially in the long run. Sometimes we have to climb a few rungs on the ladder before we can get where we want to be. 

• Time Your Life Not the Market: The Dekker Team says this a lot. Why? Because over the decades, the strategy has proven itself time and time again. If you’re thinking of selling or buying the best option is always to prioritize what you need because the market is not set up to serve you and your needs. Making the decisions that serve you and your family regardless of the market is often the wisest choice possible because you can’t be assured of what the market will do. Why wait on the market and then lose your chance for what you need? Why sit around and wait on something that may or may not happen?

The Ottawa real estate market is undoubtedly filled with uncertainties, and there are elements within our control that can help us make informed decisions. By managing what we can influence, we can navigate the real estate landscape effectively, even in volatile times. 

Looking to gain even more insight into the real estate market? Join the Dekker Team Community to continue the conversation as soon as the newest information comes out. Reach out to us at together@dekkerteam.com to join the Dekker Team Community. We’re grateful for your trust because when we move forward together, together we’ve got this.