4 Ways to Prep For a Tight Summer Housing Market

4 Ways To Prepare For a Tight Summer Housing Market

The Canadian housing market will be heavy on buyers and short on inventory this summer. If you’re hoping to nab a house, it’s best to start preparing now.

If you were hoping that high interest rates, inflation and a recession were going to make for a lazy summer housing market, think again.

Little about the the economy has changed since the beginning of 2023, yet here we are, staring another competitive summer market right in the face. Sales and prices aren’t likely to take off the way they did during the pandemic, but succeeding as a home buyer this summer will still require careful thought and planning.

Before we dig into how to approach the summer 2023 housing market, let’s look at why it will be so challenging.

Canada’s worsening housing shortfall

Amidst all the hand-wringing about interest rates and home price declines in early 2023, it was possible to overlook the yawning chasm sitting where Canada’s housing supply should be. When no one’s buying, what difference does it make how many homes are being listed?

But now that buyers, having adjusted to elevated mortgage interest rates and stubbornly high prices, are wading back into the market, the dire lack of supply across the country is once again a problem they need to plan for.

In April 2023, the supply situation was looking grim at the local and provincial level:

In Ontario, the number of new listings was down more than 32% year-over-year, and nearly 25% below the 10-year average for the month.
In Alberta, new listings were 28% lower than a year before.
In Vancouver, the number of new listings fell more than 29% year-over-year. The number of active listings for the month were nearly 21% below the 10-year average.
In Halifax, new listings were down 26% year-over-year and 29% below the 10-year average for the month.

Erica Reddy-Choquette, broker of record at Royal LePage Signature Realty in Toronto, says there are multiple reasons for the lack of new listings. Rather than selling their current homes, some move-up buyers may be opting to keep them as investment properties. Other owners could be choosing to renovate as a means of increasing their equity. Others may choose to hold onto their homes rather than battling it out with buyers over a limited number of properties.

“I think there are a lot of bottlenecks that people aren’t necessarily thinking through that are actually decreasing the amount of supply that does come to market,” she says.

With supply dwindling and both mortgage rates and home prices holding firm, what’s a buyer to do?

1. Be patient

One of the most important pieces of advice for home buyers facing a tight housing market may also be the most difficult to follow: Be patient in the face of disappointment.

You may not wind up with the first house you fall in love with. Preparing for and accepting rejection as part of the process can keep you from feeling despondent. Depending on where you try to buy, you might get outbid on multiple properties. Don’t take it personally and don’t let it distract you.

Practicing patience can also ease any undue pressure you put on yourself while searching for a home — and prevent you from making any rash decisions.

“Yes, we’re working within a market that does have a feeling of urgency and is quite prone to pressure,” Reddy-Choquette says. “But that’s where really managing the big picture is important.”

2. Assemble your down payment before making any bids

Rather than having your down payment funds spread across multiple sources until it’s time to apply for your mortgage, Realtor Justin Havre of Justin Havre & Associates/RE/MAX First in Calgary suggests you collect your down payment in one place so sellers can see it and know they can take your offer seriously.

“If…you put in an offer, you’ve got to make sure that you have the funds readily available,” Havre says. “So if you have to transfer funds out of your trust, please make sure that you do it ahead of time and that you have the funds available at short notice.”

And if you’re a first-time buyer, expect to be competing with investors and other experienced, well capitalized buyers. One way to fend them off is by saving the largest down payment you can.

3. Be willing to compromise

A supply-starved market makes it tricky to be picky about a property’s location. You shouldn’t abandon all your neighbourhood-specific desires, but remain flexible nonetheless.

“Some neighborhoods that you really want to be in might not have the inventory, and then you might explore other interesting neighborhoods and discover something that’s really a good fit for you,” says Angela Langtry, a broker at Century 21 Immo-Plus in Montreal.

Langtry suggests aligning yourself with a real estate agent who is familiar with multiple neighbourhoods. An agent with experience selling across a city may be better equipped to suggest alternate neighbourhoods if your first choice doesn’t pan out.

When it comes to the property itself, Reddy-Choquette advises buyers to make a list of must-have features and those they’re willing to compromise on. A pool, for example, may be nice to have, but it may not provide as much day-to-day value as a garage or a space for a home office

“Inevitably, there are going to be compromises, so really understanding what the non-negotiables are is important,” Reddy-Choquette says.

4. Get pre-approved for a mortgage

All three experts say prospective buyers should get pre-approved for a mortgage before viewing properties. Pre-approval establishes a home buying budget, shows sellers they can trust your offer, and can protect you from mortgage rate increases during the pre-approval period.

“Getting the big picture of what [you] can afford is number one in my eyes,” says Reddy-Choquette.

Havre suggests looking for homes priced less than the amount you’re pre-approved for, which leaves a little headroom if you find yourself in a competitive bidding scenario. Getting carried away in a bidding war could result in you making an offer too large for lenders to finance.

With so little supply for homebuyers to fight over, no combination of strategies can guarantee success in the Canadian housing market. Preparing yourself — and your finances — ahead of time won’t necessarily prevent disappointment, but it can make whatever setbacks you encounter feel less like barriers and more like bumps in the road.

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