Are Home Buyers Panicking ?
Tags: Buying home in Barrie, Homebuyers panic, Affordability in homes, Barrie home prices
It would seem to be almost a daily occurrence that we see one news article or another that suggests home prices have no upper limit. Comments such as we are in a new era where old economics don't matter any more. Certainly it's true that interest rates, a primary driver of home prices, have been at historic lows for a long time, and show no signs of rising any time soon. You should balance that with a question as to 'why' governments around the world feel it necessary to try to keep interests rates as low as they are. Certainly if economies were stronger interest rates would rise as fast as the various central banks and governments would allow.
However, interest rates alone cannot be responsible for the house price appreciation that we have been experiencing in the larger GTA and Barrie area. On average since 2011 home price in the Barrie CMA have risen +/- 35-40% and according to the Barrie Association of Realtors Year on Year price rises since this time last year are up anywhere from 15-20%. In real money that means that the average price of a 3-4 bedroom detached home in the City of Barrie has risen to around $415,000 from around $340,000 in 12 months. Although this is a general statement and there are many variances depending on the location of your home, this is an unprecedented rise. House price affordability has been steadily eroding, although due to lower interest rates not horrendously.
Where are the Buyers coming from that are Driving prices in the Barrie area? According to the Barrie Association of Realtors last year around 50% of the homes in the Barrie area that sold, were sold by members of the Toronto Real Estate Board. It's important to remember however, that many members of the Barrie Real Estate Board, such as Ian Hocking, Broker, from the Hocking Homes Team at Keller Williams , are members of both boards and report and list on both so the headline number may seem a little surprising, although perhaps not quite so staggering. None the less, it's clear that when gas prices have fallen the way they have, travelling to and from the GTA is cheaper than it has been in a long while and when it costs you almost double for the same house in York as it does in Barrie, it can be quite a compelling argument to spend an extra 30-40 minutes in the car.
In addition immigration remains strong and most migrants to Canada usually arrive first at either Toronto or Vancouver, adding to the drive for housing. Lastly it would be important to mention the increase in the number of would be real estate investors looking for some form of yield that they are struggling to find in more common homes for money, such as bonds, and money market interest bearing instruments. The Barrie Investment Real Estate arena, has been extremely busy over the past few years as investors seeking yield have migrated from around the GTA area. With home prices having recently surged however, finding cash flowing properties has become very challenging and many investors are now faced with investing at CAP rates of 4.5%. There is little margin for error at these levels and any movement in interest rates would likely see consternation in all areas of real estate, not just Barrie and not just in the investment world.
We feel that it's challenging to see how a market with such low yields and year on year capital gains will continue to see similar gains in the next year or two. That doesn't mean that we are forecasting a pull back, it just means that we feel that if you are Real Estate buyer today, there is no need to panic into buying a home, just because you fear missing out. There will be a chance to buy homes and in the Barrie area there will be a lot of supply as new building permits are issued as the annexed lands to the south are redeveloped. There is nothing wrong with doing some saving up first before entering the real estate market and we feel that the market is likely going to enter a much slower rate of capital price growth, returning more to an 'on trend' level rather than the recent heady 15-20%, which to everyones view point has to feel a little bubbly.
If you are interested in knowing exactly what is happening in the Barrie Real Estate Market and want good unbiased advice whether you are a first time buyer, an investor or you are considering downsizing, give one of the team members at the Hocking Homes Real Estate Team a call. We would be delighted to sit down with you for a no obligation consultation. 705 252 7939 or email email@example.com