What a difference a year makes.
When Covid began, real estate sunk. Cancelled open houses, scrapped sales and landlords fielding calls from their tenants for rent reductions. But once the initial shock subsided, and with many working from home – there was a resurgence in real estate. A resurgence that saw values climb dramatically.
According to Karen Hill, President of the Thunder Bay Real Estate Board the average list price in Thunder Bay in January 2021 was $282,000 and the average selling price was $277,000.
The average list price in January 2022 was $306,000 and average selling price was $321,300. According to Hill, the Thunder Bay market appears to have been rising at the national rate of approximately 21%.
With historic low interest rates and a lack of supply means most in the industry are predicting a brisk spring…but could we be in for a “Tornado Market” as one national media outlet recently predicted? We asked our local experts to share their thoughts.
Mario Tegola, Broker of Record for RE/MAX First Choice Realty believes the spring market will continue to see prices go up as long as interest rates stay the same.
“The main reason prices jumped last year was the combination of very low supply and low interest rates. I don’t think interest rates will affect the market as I cannot see rates increasing that much”, states Tegola.
Reza Sabour, a mortgage adviser and former director of the Canadian Mortgage Brokers Association told the National Post that there is “crazy pent-up demand”. “I can’t say I’ve seen anything like this in all the years I’ve been doing mortgages. This is going to be a seller’s market for quite a long time.”
According to Sabour, one factor contributing to the intensity is the number of buyers standing by with a mortgage pre-approval — those who rushed to secure funding before the Bank of Canada (BoC) raised it’s interest rate in early March.
Chris Kelos, a local builder with C. Kelos Homes Ltd. said there was more at play than low interest rates driving the market last year.
“When Covid hit, people stopped travelling, they stopped going to restaurants, they worked from home – so they decided to spend on housing. The home renovation market took off as well – it was quite a year”, admitted Kelos.
When asked to predict the year ahead, he sees continued strong demand for housing. “Thunder Bay has a number of first time buyers trying to get into the market and there is a shortage of existing listings. This will have an impact on demand for new housing as well. For home builders the demand is being impacted by the limited availability of local building lots. When Covid hit, most predicted demand would go down so some of the building lot developments were halted”.
Kelos says he will be building a few spec homes in the Maplewood Subdivision and will be building in Gemstone Estates once lots are registered and serviced in the spring. Kelos also has a townhome project underway in Gemstone that will soon be ready for occupancy. He stresses successful buyers need to be patient, understand what they can afford and determine what they want and need in a new home.
John Simperl of Bruno’s Contracting says there are some lots in their Whitewater subdivision and that they’re working on registering another phase in Parkdale, but those lots won’t be available until fall.
According to the Demographia worldwide housing affordability study, house prices have escalated amidst the pandemic in a number of housing markets, even as incomes have been dropping for a large portion of middle-income households. This is in large measure a result of substituting telework for physical commuting, which gave households the flexibility to seek new housing with more space, indoors and outdoors. This rapidly developing demand shock drove house prices up. According to the report, Thunder Bay’s home prices are still among the lowest in the country with the city ranking 8th in overall affordability across Canada.
But despite Thunder Bay’s affordability ranking, the lack of supply is causing prices to rise considerably with many buyers competing for only a few listings.
24 year old Kai Knudsen, a first time home buyer saw this first hand. After looking at properties for over a year and missing out in competing offers on one of them, his offer was accepted in February on a home in the Mariday Park area.
“It was crazy – I knew I had to go in strong, and offered 50k over the asking. The seller did have multiple offers with two other bids actually higher than mine. I had a good down payment and my financing was in place so I was lucky enough to be able to make the offer without conditions”. To differentiate from the other offers, Knudsen expressed his interest directly to the property owner in the form of a letter outlining his personal circumstances and what he was planning for the future of the home. “I’d like to think it helped”, said Knudsen.
For buyers planning to buy this spring, Eric Vastamaki, a real estate agent from RE/Max First Choice advises that you go through the buying pre-approval process as soon as possible. “It can take 2 to 3 weeks to get approved, and without a green light from a bank or financial institution sellers won’t consider your offer. I’ve never seen anything like this before – right now we have about 30 houses for sale – it was triple that number at this time last year.
It’s a great time to sell”, said Vastamaki.
