Is the real estate market crashing?


Dear David,

There is so much bad news in the marketplace. Is the market crashing? Should we sell now? – WORRIED

DEAR WORRIED: My wife spent the early part of her career in journalism. The takeaway from that industry was “if it bleeds it leads”, meaning bad news tends to make headlines.

We are currently experiencing an adjustment in the real estate market, which is not something I would describe as a “crash” by any stretch of the imagination. If housing prices were averaging $700,000 for the past year and suddenly fell to $400,000, that might constitute a crash. What we’re seeing locally is an escalating market where the average selling price jumped to over a million dollars for just a few weeks, then reverted to levels that were seen a few months prior.

In terms of listings, we have more inventory now than we’ve seen in the last few years, but it still amounts to about a one month supply. By definition, we remain in a sellers’ market. A single month’s worth of inventory can be absorbed very quickly. Meanwhile, a balanced market (not a buyers’ market) will typically have about two-to-three months’ worth of listings.

I’ve heard from some folks who think the sky is falling, and a few anxious sellers who are eager to pull their profits out of the market. This turbulence is creating some opportunities for buyers. At the time of this writing (May 2022), the “market adjustment” seems to be levelling out and selling prices in Waterloo Region have returned to levels we saw in early January. They remain significantly higher than they were a year ago.

If you plot average selling prices on a graph, the values do not increase in a perfectly straight line. Some peaks and valleys are inevitable, and there’s nothing to be gained by panicking. The exact trajectories of real estate values are impossible to predict, and if someone wants to claim victory by calling this a “crash”, they’re going to have to focus on a very narrow slice of the market.

Think of our current real estate market in terms of your last vacation flight: the plane took off and climbed to about 36,000 feet, then adjusted to a cruising altitude of about 34,000 feet, and likely remained there for awhile.

PRO TIP: If you’re selling and buying a home in the same market, the peaks and valleys will be of little consequence (you either sell low and buy low, or sell high and buy high). The greater risk comes from trying to “time” the market. If you were to sell now and wait a year to buy, you could get caught in a market swing and potentially be left on the sidelines. #Advice #AskDavid #TheNegotiator

David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Call or text today for your free home evaluation! 519-577-1212.