The Market - Bust or Balance?

03/11/2003

The market has finally changed but to what degree? Everyone is talking about it. Everyone is feeling the effects of it, but how bad is it (It being the end of our Seller’s Market).

The signs are everywhere. Our real estate board just issued a press release claiming the market has shifted into a balanced market. Although the board stats are not out yet, I already know that October has been the worst month for some time. I base this observation not only on my Teams production, but almost every other Realtor I’ve spoken to lately is wondering who shut the real estate tap off.

A very strong indicator that the bust is upon us, is the number of expired listings on the market. According to our own research taken from OREB (Ottawa Real Estate Board) there were over 120 listings expire during the period from the 1st of September 03 to the middle of October, in the general area of hwy 416 and hwy 31 corridors. This is a huge amount of listings coming off the market. I’m afraid to say, “The days of, “Trying on the Market” to see what you can get, are all but gone”.

So why are we here at this junction when a lot of things are still going well in the general economy? 2004 is an election year State side, that’s usually good news for Canadians. Our economy is expected to grow by 3.3% next year, in spite of our inflated dollar. And finally, interest rates are still scrapping the bottom of the barrel and as you know nothing drives the market like low interest rates. So with all these positives present in our economy today, why are we still not rocking and rolling? My theory is; we’ve just come too far, too fast.

Here’s what I mean. At the end of 1997 Sandy and I built a small house to live in for a year or so, until our dream home came on the market. We sold that little house for $130,000 in 1998. This summer we built basically the same house and you’ll never guess what the bank appraisal was - $228,000. So, in five and a half years according to my example, new hi-ranches on one-acre lots have increased nearly $100,000 or roughly 75%. I don’t know about you, but it looks to me like it’s time for an adjustment.

How bad will it be? Although we need to be taken down a few notches, I would be very surprised if we see a total meltdown like we saw in the 90’s. You see, the 80’s boom was all about indulgence, I don’t see that here and now (at least not for the Greater Ottawa area). To say another way, there are many legitimate factors that contributed to our sustained growth. Factors that include Ottawa coming into it’s own – blossoming from a minor-league city like Halifax and Winter-peg (both of which I adore) to the major leagues, able to compete with the likes of Toronto, Montreal and Vancouver. Calgary has undergone a similar transformation. The 416 played a huge part in the growth of our general area as well. It opened up the South for the commuter traffic, and then good ol’ supply and demand set in.

I believe we are in for a bit of a ride on the slippery side of the slope, but it probably will be short-lived, lasting no more than a couple dozen months. With all predictions pointing to the last half of this decade being stellar, I don’t think anyone should panic, but you expect prices to drop a little. Thanks for listening.

This is Rob Thompson saying, “Good Luck and Good Selling!”

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