One Regina realtor attributes the reason for home sales hitting a 10-year low point in August to over-pricing in a tough market.
The Association of Regina Realtors reported only 305 homes sold in the city in August which represented a 17 per cent drop year over year and marked the lowest number sold since 2008.
Craig Adams with Remax Crown Real Estate said it definitely is a tough market for sellers because there is a lot of inventory and house prices have dropped substantially in the last few years
He said single-family homes are still selling quickly or well within the average listing time of 45 to 60 days when they are priced properly.
“Some sellers are still thinking that prices are back where they were four to five years ago and that’s just not the case. So if you’re still trying to get what you thought you could get four or five years ago, that’s not going to happen,” Adams said. “If you keep the price at that point, it’s going to take a long time to sell.”
According to the MLS Price Index, the composite benchmark price for a house in Regina – accounting for condos and townhouses – has dropped to $277,000.
Adams said the average price of a single-family home in the city is still around $300,000 which he describes as a “sweet spot” for many first time home buyers. He said there are many houses on the market which are missing the mark on price.
While some sellers may be holding out on prices that are too high for the market, Adams noted buyers are also under a crunch because they can’t qualify for mortgages for those prices.
“Because of the new stress test rules, buyers are not being qualified for as much as they were, say a year ago,” Adams explained. “So one, they’ve got to lower their expectations of what they are approved at when they’re going out and looking, or they’re just not going to buy.”
He said people looking to sell their home because they are relocating for work or maybe because their family has grown also face more pressure to sell because they can’t carry two mortgages under new rules.
“What they paid for it a few years ago is not what they’re going to be able to get right now,” Adams said. “They have to come to the realization that they might lose money on their home and not recoup what they have paid for it. If they come to that realization that it is what it is then they’ll be fine and they’ll be able to sell it. But if they try to recoup what they have paid for it in the last few years that could be the challenge for them for sure.”
There are also still a lot of new builds available on the market, particularly for condos.
Adams noted some construction companies in the city have had to take a different approach to business in the current housing market.
“We don’t see as many spec houses being built by builders. Especially custom builders, they will normally now wait until they have a client before they start building just because if they’re building on spec it might take a little bit longer to sell that property and then they’re carrying it longer than they would have,” Adams explained.
Adams said larger development companies are still building more houses because they take a longer-term approach to the real estate market, predicting demand will continue to increase in the next several years.
While the average price of houses is declining in the city and the prices buyers are able to qualify for in a mortgage has also dropped, the cost of building homes has stayed the same.
“There’s a little bit more of a disconnect between the brand-new construction and resale, where four or five years ago they were a lot closer,” Adams said.
He pointed to the new mortgage rules as having an unintended chilling effect on the real estate markets in smaller cities across Canada, when they were initially meant to cool markets in Toronto and Vancouver.