Milton home sold for $436K loss; What’s driving the real estate market

The numbers say the housing market is stagnant but, for some Milton homeowners, it crashed over the summer.

A house on Mockridge Terrace, for example, sold in July for $1.29M, but it was purchased two years ago at $1.65M. Another, on Snider Terrace, lost $436,000 in value, selling for $1.22M this summer after being purchased in 2022 for $1.65M.

Which begs the question, what is going on? So INhalton.com asked a local realtor.

“It’s no surprise to those in the industry,” Fred Decarolis of Milton’s Revel Realty Inc., told INhalton.com.

It all comes down to interest rates.

“Real estate had been pretty steady for a long time, but right when COVID hit, things went nuts. People started to invest like crazy.”

For nearly two years, from mid-2020 to mid-2022, interest rates were at an historic low. The absolute peak of the market was February and March 2022, right when both of the above properties were sold.

“People need to remember there are no guarantees when it comes to investing in real estate. It’s not just automatically an ATM.”

Graphic by @Shazigoalie

So why the price drop?

“Mortgages are tied to the prime interest rate. Usually prime plus two or so. After things bottomed out, interest rates started climbing. And they went from the lowest point in 20 years to the highest point in 20 years.”

That means people who got into the market two, three, or four years ago are now seeing interest rates rise from 2.5 per cent to seven per cent.

“What was maybe $1,000 in interest per month is all of a sudden $3,000. Not everyone has the budget to be able to afford that kind of extra monthly expense.”

And that’s where we see sales by desperate owners who are willing to take a loss of hundreds of thousands of dollars on properties they’ve only owned for a handful of years.

But there’s a glimmer of hope with the recent interest rate cuts by the Bank of Canada.

“If the prime gets back down into the fours, things could normalize.”

Graphic by @Shazigoalie

What is Decarolis telling people who approach him about selling?

“I ask them, ‘Why are you selling?’ I want them to make a fully informed decision. If they don’t have a choice, sure, let’s get it done. But if they’re upsizing, maybe we should be making offers conditional on the sale of their current property. We always try to protect our customers.”

Decarolis pushes back against the narrative that because prices are falling, it’s automatically a buyers’ market.

“It’s not a buyer’s market overall, but it is compared to the last several years. It’s actually a balanced market. Historically, houses don’t sell in three days. They don’t sell for $100K more than the last property on the street.

“What buyers are feeling now is choice and not being rushed into decisions.

“If I could tell people one thing right now it’s this – make sure your decisions are based on good math. Find multiple experts (lenders/financial advisors/Realtors) and don’t make an emotional decision.”