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Where is Canada’s Real Estate Market Heading?

Understanding Real Estate Trends

For millions of Canadians looking to buy or sell their home, the most important unanswered question is: Where is Canada’s Real Estate market heading? Canadians are not sure if the market is heading in the right direction or if it will come tumbling down in 2017. Most published reports and journals discuss about the flattening out of property prices in the real estate market. Apparently, certain areas in Canada are already witnessing a decline in prices and sales activity, while other parts appreciate the price gains, albeit at a slower speed than seen in the past.

Housing markets are susceptible to bubbles, especially when compared to financial markets. This is because of the large transactions and carrying costs associated with owning real property. But recently, the combination of regulations and low interest rates that make it easy to access mortgage financing has forced a shift. The influx of borrowers in the real estate market has in turn exerted pressure on the market’s demand.

Calgary’s Real Estate Market

Sales activity in 2017 is expected to fall, for the most parts. Have a look at the following  MLS® HPI which provides a more precise picture of home price trends in Calgary.

Benchmark Calgary Real Estate Market

We see that in Calgary, a sharp increase in home prices was seen Early 2015, with a steady decline since then. This data suggests that in Calgary and in many parts through Western Canada, it is a buyer’s market.

Rest of Canada

According to a publication by the Canadian Real Estate Association, state sales are projected to decline towards the end of 2017, at least by 3.3 percent.  As indicated on the annual year-end report, the Canadian Real Estate Association stated that the transactions in BC  and Ontario are expected to remain avid, but have still fallen short of record levels this year. This is primarily because of the reduction in affordability and the apparent lack of affordability priced listings for tightened mortgage rules as well as regulations.

A reduction in sales activity will also have a negative effect on prices, prompting the prices to fall. This is because fewer activities lead fewer demands, and this in turn forces house prices to fall. In its end of year report, The Canadian Real Estate Association argued that the reduction in sales in PEI was caused by the incredible 2016 selling season, which is not expected to take place in 2017. However, the market can still anticipate some rewards of a weakened Canadian real estate industry. But, on the right side, not all markets will be affected this year.

The Canadian Real Estate Association predicted that home sales will continue to shoot up in Quebec and Alberta because these markets had a slow sales season in 2016. However, a reduction in sales activity will force a decline in prices in several provinces such as Saskatchewan, B.C, PEI, Nov Scotia and Newfoundland as well as Labrador. For this reason therefore, the association says that the national average price will reduce this year by at least 2.85 percent, to settle at $475,900.

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Why you should care about the Cumulative Days on Market (CDOM) Statistic

How the MLS® works with the DOM Statistic

To begin with, it is important to understand how the MLS® used to work in the Calgary Real Estate market. In the past, when a house was listed, as soon as it hit the MLS®, which is the abbreviation for Multiple Listing Service, the Days On Market (DOM) counter began at 1. The counter continued to move for as long as the house was listed by the agent, until it was leased, sold, cancelled or removed from the listing agent. Well, there is a difference between withdrawn and cancelled, but that’s a topic for another time.

On the other hand, certain houses take long to sell than others, and those that stay on the market for a long time worry both the seller and agents. Both the former and latter don’t want to see their properties on MLS® for so long as it indicates a red flag to buyers and agents alike. For this reason, many agents opt to interfere with the MLS®.

One day agents decide to cancel their listings and then re-list them the next day. This prompted the DOM once again not taking into account the days the house was listed before. This approach went out of hand and made DOM become useless. However, MLS® had to do something about this and took the necessary steps.

Setting up the MLS® now

On the MLS®, you can still see the DOM, however, currently, you get to see the Cumulative Days On Market (CDOM), which features all the days the house was listed on MLS® by agents, in spite of the number of times the house was cancelled and listed again on the market in the term of the listing agreement.

Assuming the house was listed on the market for a month, and the agent cancels the listing for 15 days, the listed the property again, a month later the house is sold.

The DOM will indicate 3o days, which are the days between when the house was listed on the market again and sold, or rather closing. This clearly indicates the amount of time it may take to sell the house.

The value the CDOM offers

The CDOM may be very accurate, but it might also mislead you a great deal since it has comes with some limitations. Assuming the agents listed the house for nine months, and then the listing expired and the home owner decides to hire another agent. The new agent takes on the new job and lists the house on the market the next day, then he will have started a new CDOM on the same house at 1.

Conclusion

You should only consider the CDOM as a grain of salt. It may come in handy or not. In addition to that, do not assume there is a CDOM listing at 1, which a new home is coming on the market.

The purchaser agent should know the history of the house before you submit any offer. Make sure you ask them to carry a current and historical title search. Carrying out a flood search is also really important in the Calgary Real Estate market.