A family in Ottawa is packing their belongings and moving into what they hope will be their “forever home,” but they won’t bring nearly as much money with them as they hoped to get from selling their first home.
“We think we lost about $150,000,” said Robert Hawkins.
“I know we didn’t lose her because she wasn’t ours, right,” said Natalie Hawkins. “But not to earn what others earn before three weeks…that’s a lot of money to waste.”
To cover the family’s expenses, the family will rent an upstairs bedroom in their new home.
“And that’s something… we never thought of,” said Natalie Hawkins.
With house prices falling across the countryHowever, sellers have to internalize the fact that extremely high selling prices are not guaranteed.
The couple bought their four-bedroom, three-bathroom detached home in Barhaven in 2015 for $350,000.
They’ve since finished the basement, decked out the backyard, and put in a stainless steel fence, deck, patio, and hardware.
Recently, they discovered a slightly larger house being built on the street that has a two car garage and a larger yard – perfect for a couple and their two young children.
“It seemed like our forever home,” said Natalie Hawkins.
“And the way the market has been, we could possibly sell that house for a big difference in coming to the price of the new home. That was our expectation.”
They put down a $100,000 deposit and are ready to sell their first home.
They watched their next-door neighbor sell a model of a mirror image of the same house for $890,000, and were hoping for a similar price for their home.
But then market conditions changed abruptly.
They considered keeping their first home as a rental, but getting an additional mortgage was difficult. They hired a realtor as the value of their home continued to decline.
The buyer was found and the sale closed. Price: 740 thousand dollars.
While the family made a huge profit off their first home, they are now facing what they expect will be nearly a decade of additional mortgage payments to make up the difference in value between that home and their new home.
The downward trend is evident across the country
For those who have been keeping a close eye on the housing market, a correction has always been in the cards.
“Things have gone too far,” explained Garth Turner, financial advisor, author and former Member of Parliament. “It has gone up too quickly.”
“It was inevitable to see the pendulum swing again. And here we are.”
Statistics posted by tCanadian Real Estate Association (CREA) June 2022 It shows that the seasonally adjusted national home price index fell by 1.9 per cent.
A look at the national median home price excluding the two most expensive markets in the country — Vancouver and the GTA — shows that the median home price in Canada is down $114,500 compared to June 2021.
The ratio of sales to new listings came in at 51.7 percent, the lowest level since January 2015, meaning a fairly even balance between supply and demand.
Turner explains that a unique set of circumstances led to a temporary rise in home prices.
The COVID-19 pandemic has pushed people to cocoon at home and sparked interest in owning larger homes in larger suburban areas.
This perfect storm, Turner said, combined with exceptionally low mortgage rates — briefly obtainable at less than 2 percent — and the influx of government money through pandemic relief programs, has sent prices up 30 to 40 percent.
He expects it to take several years for the housing market to recover. He remembers the great housing crash of the early 1990s.
“It took 14 years to recover,” he said. “Three years down; 11 years to return to the same level.”
He predicted “we are only halfway” from the current decline in home prices.
Brokers Facing a Changing Market
Real estate agents, who have spent the past few years managing fast sales and bidding on asking price, have to explain to potential sellers that things have changed.
“For the average person who was expecting a $700,000 (sell) suburban cottage, that just isn’t the case anymore,” said Nicholas Crouch, Realtor at ReMax Hallmark Realty Group.
Crouch cited the number of days the market is on as a leading indicator of cooling conditions. That number has risen from just five days at the height of the market to nearly 20 days now.
He adds that buyers now have time to walk around and bid on terms, something they “hasn’t seen in years.”
Family Still Feels ‘Very Lucky’
Robert Hawkins expected a market correction, but said it came at a uniquely bad time for the family.
Even after the setbacks they’ve had, it sets the record straight.
“We are very fortunate to be in the position we are in,” he said, adding that they would not have been able to purchase their new home without the accrued equity from their first home.