You may have noticed that the price of your home has gone up, as you see your friends and neighbours listing homes that sell instantly, often in bidding wars. The rumour is true: the Calgary real estate market is on fire right now.
As of this writing there were 2513 listings available in the city of Calgary. This is an extraordinarily low number of listings. But how does this affect your house price? What is a hot market? How is it made? And what causes your home’s value to increase? Let’s have a look at that today.
The real estate market is governed by supply and demand. The supply is the amount of homes on the market, and the demand is the amount of people wanting to purchase these houses. Right now we have a very, very small supply/inventory/available listings, and we have a very high demand for the small amount of listings that we have. So what happens?
Well, Jonny and Suzy Homeseller in Auburn Bay put their 2 story on the market (with the Vanderveen Team of course!) for fair market value. Once listed on the Calgary MLS, we get one person writing an offer and agreeing to pay fair market value. Then we get another person yet, who very much wants the house, and says, “I’ll pay fair market value, plus $2000 more.” Then we have another couple still, who is just relocating from out of town and is desperate for a new place, and they say, “I’ll pay fair market value plus $5000.” And on and on it goes. (Three weeks ago Clint and I had a listing sell for $17,500 over the asking price and we had 9 offers on the property. )
So when all is said and done and all of our homebuyers in Auburn Bay are done fighting over the listing, one couple emerges victorious, and we get a selling price which is $20,000 more than what the sellers were asking. That number now becomes the new fair market value. So when Sally and Jordon seller-next-door list their home in Auburn Bay, their starting number is whatever Jonny and Suzy sold for. If no new supply comes onto the market, but demand stays the same, we’re going to have another fight break out over Sally Jordan’s place, and the price will increase again and set another new price standard.
This is what we see happening out there: very little supply and very high demand. Likewise, in a buyer’s market, we have tons of supply and very little demand. When this happens, we get sellers putting their home on the market who get ignored. The only way to sell it then becomes to reduce the price, again and again, until a buyer finally decides to write an offer. The new low price which is accepted then becomes the new fair market value for that type of home in that neighbourhood.
So, what stops sellers from pricing a $500,000 house at $700,000 in an upwardly mobile market such as the one we have? Well, if you overprice a listing in any market, you’re going to get ignored and you’re going to wreck your listing in the long run. It’s still important to make sure you’re in line with the recent comparables so that a frenzy is created over your home, and you walk away a winner.
So what does this mean for you? Well, maybe you’re like Clint and I, and everywhere you turn, you find a kid standing in your direct path, because 2250 square feet is just too small. Now may finally be the time that you have enough equity in your home to move up to something more comfortable and suitable for your family at the moment. If you’re feeling the itch to move and the curiosity about what you can afford, the first step is finding out the value of your current home, and then talking to a broker. Send me an email at email@example.com and I’ll happily take a look at the value from the comfort of my computer so that you can start deciding if a move is right for you.
If you are a first time home buyer, the speculation should stop now. You need to get out there and decide because prices are climbing every day. Contact me, and I’ll set you up on a search so that when the perfect house comes through, you’ll be instantly notified in seconds.
Those of you with revenue properties may have enough equity in them now to pull a downpayment for a new revenue property and keep your wealth growing! It doesn’t hurt that vacancy is at an all time low and rents are at an all time high. It’s a great time to own a revenue property in Calgary forsure. If you’ve been thinking of picking up your first revenue property, there’s no time like the present.
2014 is going to be an exciting year!
The Vanderveen Team
Maxwell South Star Realty
Phone: 403.253.5678 Fax: 403.592.6736