• Aly Janmohamed

Everyone Hates The Sticker Price!

If you are anything like me, you hate the sticker price. It's just a dreamt-up number from the seller of what they want to get for their item, whether it be the latest iPhone or a home. But what happens when that sticker price is lower than what a buyer is willing to pay for it?


This is where we are starting to see that multiple offers for homes becoming the new norm. The interesting part is the sticker price is only one component that is taken into consideration and is usually the one that gets all the attention.


But it's not just that buyers have woken up and said now is the time to buy a home. The market conditions have changed to essentially make the idea of purchasing a home too good to pass up.


In September 2020, the discounted 5-year fixed rate for a mortgage was 1.69%, in February 2021 it had dropped to 1.39% (and it is now starting to climb once again). This drop of 0.30% equates to about 19% savings over the life of a mortgage (25-year amortization, 5-year fixed term, $450,000 average price). Albeit you don't get this rate for all 25 years, but for the first 5 years of your mortgage is when you pay most of the interest on your mortgage, not your principal).


So to pay over asking buy 1-3% of the sticker price (say on the example above would be ($4,500 - $13,500), on this type of home may be something worthwhile for a buyer that is saving nearly $19,000 in interest due to the rate change.


So the next time you are looking at a property in our current market and see the home sale for over asking, this might be the reason the buyer decided to pay over the sticker price.


In terms of the current market conditions, here is where we sit as of today, March 8, 2021.

As of today, we outperforming March 2020 in terms of sales (110%), new listings (26%), and a lower amount of active listings (29%). The median price has increased year over year by nearly 9%.


With the anniversary of COVID being recognized as a pandemic in Canada in March, this trend is to be expected considering our real estate market was at a complete standstill at this same time last year. We have recovered significantly due to the lower interest rates obtained by today's buyers as well as the reduction of our once oversupply of single-family homes in Calgary.


Some have projected to me that they feel the as the interest rates increase our market would begin to slow and return to a balanced market. Although this may be true, I would argue the lack of inventory is what is really driving our strong seller market. As we start to see things open back up in Calgary, we will still have residual effects of sellers being cautious of having strangers in their homes, the soft lumber issues for builders may still remain for a certain amount of time and the seasonality of our market shows that in the summer months our inventory levels naturally drop.


It's with all of this that I believe 2021 will continue to be a strong year for our real estate market. Interest rates are starting to creep back up but are still at a record low level.


If you have any questions or would like to chat more about the market. I'd love to start to organize some calls and catching up once again. Feel free to shoot me a note on social and let's chat.


Take care,

Aly

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©2021 by Aly Janmohamed | Real Estate.