Dear David,
We bought our house at the peak of the market a few years ago. The price we paid was competitive at the time. I’ve accepted a job in a smaller city and need to sell, but am shocked at how much the market has changed: mortgage rates are through the roof, we’ll probably have to sell our house for less than we paid, and we don’t qualify for as much on a new home as we thought. I assumed we were in a good financial position, but it really doesn’t feel like it. How do we handle this? – KEEPING ME UP AT NIGHT
DEAR KEEPING: First, take a deep breath. The value of your home has likely gone down, but when you’re buying and selling in the same market, you’re like a boat anchored in a bay. When the tide is low, it’s low for everyone, whether buying or selling. Likewise, when the tide (or market) rises, everyone sits higher.
Unless they work in the real estate industry, most people don’t pay attention to the market once their purchase closes, which is a good thing. Real estate is a long-term game, and watching for daily changes in the market is bound to make homeowners nervous. As with RRSPs, a “set it and forget it” approach makes a lot more sense if you want to sleep at night, but with a job change in the mix, you’re being forced to assess your market position earlier than you would otherwise.
About 40 percent of mortgages will be up for renewal in the next 18 to 24 months, and every one of those homeowners will have to make decisions based on what the market is doing at that time.
Real estate has been extremely volatile in recent years, with sellers rejoicing when the market is hot and buyers dancing in the streets when it cools. Right now, in the fall of 2023, we have the unpleasant combination of high retained prices (the current average sale price is still up about 25 percent from Spring 2020 during COVID) and historically high interest rates, the likes of which we haven’t seen in decades. Nobody is happy at this point, but like the tides, the market will change.
The main takeaway right now is you’re buying and selling in the same market. The value of your home has undoubtedly dropped from its peak a few years ago, but so has the value of the home you’ll be purchasing. Selling for less than you paid is sure to make you queasy, but out here on the water, everyone is in the same boat. The bright spot on the horizon is that you’re moving to a smaller centre, which will likely give you a buying advantage since prices there may be lower. Selling your house when the market dips isn’t like selling a stock and walking away. You’re buying right back into the market, and current conditions apply to everyone, no matter what side of the transaction you’re on.
PRO TIP: Don’t make life decisions based on the current value of your home. It might feel like you’re losing something at the moment, but new jobs don’t come along every day. Property values recover, but an opportunity lost may be gone forever. Set your sights on what’s ahead. Boats on the bay will rise and fall as the tide rolls in and out, but time is the only thing that changes the outcome. #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.
