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Market cooldowns can be a troubling time for investors. After all, for people looking to sell off investment properties or leverage their existing equity declines in a property’s value – even temporary ones – can become a serious issue. However, that does not mean the market cannot be made to work for you.
While slower market conditions are not always great for people looking to turn a profit, it can be an excellent time to grow your portfolio. So, if you are looking to gain the advantage in the real estate market and make the most of the current market, here is how a cooling market can benefit you as a buyer and an investor.
Home Values Are Dropping – But Can This Be A Good Thing?
Contrary to the popular sentiment, a cooling market is not inherently a bad thing. It is true that certain strategies and processes are harder to complete while market activity is down, it also opens the floodgates for various other parts of the industry to pick up in a meaningful way.
First and foremost, a cooling market gives control to the buyers. This means that investors and homebuyers alike who are trying to get the best available deals on their properties have their strongest bargaining and negotiation positions during these times.
How A Market Cooldown Benefits Buyers
When it comes to gaining the advantage while weathering colder market conditions, there are four key areas that buyers are able to gain the edge. These areas are:
Higher Savings and Lower Sale Prices
As housing prices drop, these savings are passed along to the buyer. Which means that a house that previously would have sold for $550,000 may be listed at $400,000. This is excellent for investors who would like to spend less for a property.
If you time your plans properly, you may even be able to use a brief downturn as an excellent opportunity to complete a flip by buying a distressed property at an increased discount and then selling it as a fully updated home after the market bounces back.
More Buying Options
When the market is cooling down, properties come off the of the market at a much slower pace. This means that instead of houses being listed and sold within a matter of days a wider inventory of houses and properties will be on the market at one time as sellers wait for offers to pour in.
This means that if you see a property you think may have potential, you will have much more time to ponder your options before committing to a decision than you would have had during a hot market period. This allows for you to weigh different investment opportunities and lock in the best property for your individual strategy much more reliably without the concern of other investors trying to beat you to the offer.
Market cooldowns most frequently happen during periods of low affordability amongst the majority of the population – thus triggering the slower sales and reducing the number of offers being received on a property.
Due to this, you are far less likely to encounter a competing offer on a property during a cool market. This is beneficial for multiple reasons. Not only will facing fewer competing offers mean that you do not need to rush into deals, but it also means that you are less likely to need to bid over asking in order to get a property.
More Room For Negotiation
As the market becomes colder and properties wind up staying on the market for increasingly long amounts of time, your negotiating power as a buyer increases. This is your opportunity to make offers slightly below asking to see if sellers will take the deal in exchange for no longer being forced to hold a property they planned to be rid of already.
Important Things to Stay Aware of When Buying in a Cooling Market
While a cooling real estate market absolutely will put more power into your hands as the buyer, there are still a couple key concerns that you should remain aware of.
The Market Fluctuates – So Prices May Change Over Time
The real estate market is always in flux, so prices are not always going to stay the same. While a property may be listed for $350,000 on the initial ask, if it sits on the market for two months without an offer, that price could go down. Alternatively, the market conditions could improve, and sellers may hike up their asking prices in order to get the best deal for their property.
So, whenever you are going to buy and contemplate waiting for the prices to change, you need to take a look at the bigger picture to accurately gauge whether waiting will truly get you a better deal or cost you more money in the long run.
Interest Rates May Not Be Ideal
Currently in Canada, we are seeing the federal government and the Bank of Canada raising interest rates in order to cool down the housing market and drive down the rate of inflation. However, while the outcome it is bringing about is certainly beneficial for buyers, the act of raising interest rates is eroding the buying power that people have in the market.
Getting the Best Rate For Your Investments
Regardless of how much the rates are impacted, what truly matters is that you are working with a mortgage broker you can trust to get you the best available rate at the time of purchase. After that, if rates improve you can always use their services to switch over to a better deal.
Here at LendCity, we pride ourselves on delivering exactly that – the best available rates for each of our clients every single time. So, if you are ready to build strong investments regardless of market conditions, give us a call and we will get you set up with the best deals from our network of lenders.
To get started visit us at LendCity.ca or give us a call at 519-960-0370.