Open Bidding, Housing Prices & Recession: Change Is Coming

Big change is coming to a real estate market near you. Open bidding, housing prices and recession are the hot topics of the day- but there are reasons to be optimistic in the medium to long term. Everyone who is honest with themselves can see that there is instability in the marketplace.

It is evident that housing prices have dropped across the country in a significant way. At the same time, monthly payments have gone up, inflation is impacting food prices and jobs can be scarce for many workers. It may not be termed a recession by the statistics keepers, but we can all feel that something is wrong right now in the economy.

Open Bidding, Closed Bidding & Home Buyers

One proposed solution to the problem of high housing prices is open bidding. Currently in Ontario real estate runs on a closed bidding system, where no-one but the listing agent & their client know the content of the offers being tendered. People are ‘bidding blind’ in Ontario.

Open bidding systems allow everyone to see the content of offers being tendered. This allows new bidders to see older bids, and offer more if it is possible for them to do so. Proponents of open bidding claim that this will reduce housing prices by allowing people to make more informed offers. Critics claim that it actually increases prices in all the jurisdictions that have made the change.

How Will Agents Deal With The Open Bidding Trial Run?

This blog won’t attempt to prove or disprove either claim about open bidding. Instead I would just like to introduce you to the controversy, and discuss some other impacts that have gone unnoticed so far. For instance, the voluntary open bidding trial that is commencing in Ontario will impact established and new agents very differently.

New agents may be more inclined to participate in the new voluntary system because they are not entrenched in the old system. However new agents also have less infrastructure to actually implement this new way of doing things. Updating the MLS listing with 14 offers would take a significant amount of time, and could result in incorrect information accidentally being displayed.

Older agents may have the resources to pay someone to help them update their listings, but they are unlikely to change the way they have done business for decades voluntarily. The fact that some properties will have open bidding & others will have closed bidding may lead to issues understanding the process by the average family.

Families have enough to deal with when buying a home. They don’t want to have to learn to participate in two different systems when buying a home. They have bigger concerns, like dealing with the recession and trying to afford a home.

Good News For Housing Stability?

There may be good news for homeowners looking to purchase a home sometime soon. There are big differences between the current recession & the recession of 2008 where housing prices crashed much further than they have so far in 2022. In 2008 there were loose lending rules, an oversupply of homes & people had tapped very far into their house equity. In 2022 we are in almost the opposite situation. Lending rules are tighter, there are too few houses available compared to the number of buyers, and people have significantly more equity overall.

In 4 of 6 of the last recessions, housing prices increased. The experience in 2008 was the exception, not the rule. It is possible that this recession will not cause a housing price collapse as severe as in 2008. Some sources think housing prices will bottom out soon.

I think that we can expect a few more surprises this recession, and I am not sure if we are at the bottom yet. But I do think there is hope, and I am sure that we will all make it through this okay, as long as we plan appropriately.

If you need professional help making decisions about real estate in Windsor-Essex Ontario, give me a call 519-300-6464.