As 2020 began we saw all indicators pointing to a balanced market.
Then 2020 took a turn:
Inventory levels were sufficient to meet our demand and we finally found a new market value. Our economy has been in a recession which no one seemed to be talking about. This was partly due to the decline in our natural resource sector which did slow down the housing industry. Over the past 4 years, we saw the average sale price drop by about 15% in Saskatoon. Now with an adequate supply of listings, we entered 2020 with buyers finding confidence in the market again.
With little notice, things took a drastic change in March. As we started to see a lot of uncertainty with Covid-19. The unknown virus had people starting to panic. Those already looking to sell or buy found a new sense of urgency in doing so. This is also when we started to see a decline in new listings. Many homeowners did not feel comfortable selling in this new environment.
Real Estate As An Essential Service:
As Saskatchewan went into a lockdown we really did not understand what this meant for our industry. Real Estate fortunately was an essential service and many were grateful for that. We still had some people searching for a new home as we had just sold theirs. By saying that the market certainly did slow down through April and May as only the people that needed to buy and sell were doing so.
With so many uncertainties during the pandemic, our economy needed a boost and that’s exactly what we got. The Bank of Canada lowered its prime rate in May to .25%. This one move forced the banks to lower their interest rates and offer the clients some of the lowest interest rates we have ever seen. No one saw this coming but it was done to stimulate the economy. Stimulate the economy it did and this paid off for first time buyers, anyone looking to buy a recreation property, or those that wanted to step up into a higher price point of the home.
Month over month we continued to see an increase in sales and sales volume but also a steady decline in new listings coming to the market. Our supply continued to dwindle as activity levels increased. To put more fuel on the fire, we then saw bond rates decrease which gave the banks the ability to reduce interest rates again.
Interest Rates On Housing:
At this point, we are seeing as low as .99% for a 5 year fixed mortgage. This once again brought more people to market looking to capitalize on these rates. For most homeowners, these interest rates give them the ability to refinance and save monthly or buy a larger home with the same payments even after paying their mortgage penalties. This resulted in a record-breaking amount of sales to end 2020 and we even saw an increase in the average sale price by 4%.
All Good Things Come To An End:
With all this positive news we believe this is giving people a false sense of security. We have seen no negative effects from Covid-19 in the Real Estate market so far. As we see programs like the Government of Canada wage subsidization come to an end, this will give us a better idea of how people and businesses are actually doing. This Real Estate Bubble will come to an end and we can not stress enough to buy well within your means