Is our real estate bubble bursting?


Of the homes being sold right now, a larger proportion are in the affordable ranges, primarily because of who is moving.

Dear David,

We’ve put off buying a house for the last few years, hoping that prices would drop. I’ve noticed that sales seem to be down with the pandemic, is this our real estate bubble bursting? – READY TO POP

DEAR READY: What we’ve seen since the start of the pandemic is a significant drop in sales volume. The spring market just got rolling, then along came COVID-19. Locally, our sales volume in April is down about 65 percent from last year, but that is strictly volume and has nothing to do with price.

One of the challenges we face when interpreting data is sample size. Our cities feel larger than they are, but because the market samples are small, minor fluctuations can sometimes appear overly significant. It can be hard to make sense of what’s happening.

In our current sales inventory, I see a higher than usual ratio of entry-level and mid-priced homes, alongside a smaller than usual ratio of high-end listings. Of the homes being sold right now, a larger proportion are in the affordable ranges, primarily because of who is moving.

Buyers and sellers fall into two main camps: the first group must move. Often they’ve been displaced or face extenuating circumstances due to death, divorce or employment change. The second group are “elective” movers who want to move, but don’t need to. Typically, these folks are moving up to their second or third home and will tend to buy between spring and fall, when the weather is nice. Much of this group has taken a temporary step back with the pandemic, which may skew our local figures down a bit. Meanwhile, values seem to be holding and the real estate bubble hasn’t burst.

In the last eight weeks, the transactions I’ve been involved with have seen their volume of showings drop to about half of we would have expected before the pandemic. Even so, they’ve achieved pre-pandemic-level results in terms of number of offers and selling price. PRO TIP: None of us can predict the future, but in my opinion, home values in Waterloo Region should hold steady. We’ve seen a consistent seller’s market in the past few years, which means there have been more buyers in the marketplace than homes for sale. Some buyers will step back due to the pandemic, but sellers will too, and likely in fairly even numbers. Overall, I believe total sales will be lower over the next few quarters, but it’s hard to see a circumstance in which prices will be driven down. #AskDavid #Advice