Archives for July 5, 2022

How is the Real Estate Market? That is the wrong question to ask.

I get asked all the time get asked all the time by clients, prospects, investors, other agents even what the real estate market is like. The answer always starts the same… (I did not even really consider the habitual way I answer this question and thus the inspiration for this post!)

That answer is “well, real estate is a cycle – it goes up and down and has a top/middle/bottom and in Alberta due the energy sector economy that cycle is typically 7-10 years in Alberta.

A better question might be, where are we at in the real estate cycle? Where do the fundamentals indicate where it might go next? Now, we can only ever have access to so much data from real estate boards, stats can, local media. I do not have a crystal ball, never profess to have owned one in fact – however I can and do speak on what the economic, behavioral, and most importantly the “in the trenches” intel that only those active in the industry are privy to. (those actively investing, renovating, renting real estate in a given market)

The stats year over year, and even month to month sometimes can be a bit deceiving – for example interest rates have dramatically changed in Canada which sort of makes comparing the 2 market conditions a bit silly…but we have to go with something and the public has a short memory so a 12 month period is normally used.

While interest rates do play a role in pricing, because more than 80% of buyers are getting mortgages – the demand side of this equation is not really driven by interest rates. Demand is driven by population growth/decline and that in turn is driven by the availability of mid-high paying jobs in the Market/Area in question.

The reason more people buy houses when money is cheap is that the people who wanted to buy a house can afford it in that current job market with a different “average wage” climate. Cost of labor and materials also drives prices as we have seen in markets like Ontario where developers can’t even complete the buildings due to costs rising over 50% in many categories.

Development does not support increases like that or the project will lose money, and the red tape that makes the process take so long is a post for another day. (I am looking at you government of all levels)

To your success,

Tim Reid

-Respect the Hustle