3rd Month of Slow Growth In Windsor | What Is A Correction?
With Another Rate Hike in June, Expect June To Be Month 4
The Windsor region experienced the 3rd month in a row of lower sales and higher new listings in May. Average house price is still at all time highs in most of the Windsor Essex region of Ontario, but price gains have certainly slowed.
The economic factors that caused these changes to the real estate market have not let up. If anything they are still gaining momentum. At the start of the month of June there was another interest rate hike impacting home buyers. Next month’s statistical releases will probably state June was month 4 of this trend.
The idea that there is an economic downturn coming has gained popular appeal. That means that now is the time to research and understand what may be coming.
Slowed Growth Is The Precursor To Correction
When a marketplace or sector begins to slow its growth, this can be a sign of overvaluation. In general,the best companies and sectors to invest in are the ones experiencing the fastest growth. That is where the vitality is. For years this was Windsor.
It is a bad idea to invest in a company or industry that is contracting, or where growth is slowing. Slowed growth and contraction is a sign of weakness and potentially impending market correction.
Windsor and most of Canada’s real estate marketplace is currently experiencing slowed growth in prices, and shifting market conditions.
What Is A Market Correction?
A market correction is a noticeable down turn in a marketplace or industry that typically will not have much impact on the rest of the economy. A correction is a healthy part of a free marketplace.
Over time, assets can become somewhat overvalued for various reasons in a market cycle. When goods are overvalued, eventually some type of event or change occurs causing the correction. After prices find a bottom, they will even out at a more fair value.
Windsor’s home values have not on average declined, and thus we are not yet in a real estate correction- but one could be coming months or years from now.
What Is A Buyer’s Market?
A buyers market happens when the supply of homes exceeds the demand. This often occurs after or during a correction. During a buyer’s market prices may go down, and it will take more time to sell a home. In this kind of market, buyers have a lot of power to ask for things from sellers. Windsor is not in a buyers market yet, but things are shifting in that direction.
Windsor has more than one month of house inventory listed for sale right now. That means that for some houses it will take more than one month to find a buyer. That is a big change from the last year and a half or so. There are also smaller bidding wars in Windsor, which shows there are fewer buyers. This is a far cry from lowering prices, but the trajectory is now in this direction.
If you were a potential buyer who got pushed out of the market in the last few years, have hope. Conditions may be changing slowly in your favour.
What Is A Recession?
A recession is a technical term for when the GDP of the country has decreased for two consecutive quarters. It’s like a general correction in almost all sectors at once across the country, and it lasts for 6 months or more.
If Canada’s entire real estate market enters a correction, this could easily spill into other sectors of the economy. If the economy took more than 6 months to recover, that would have created a recession. A recession is a term you can only apply after a significant amount of time has already passed. You cannot know for certain you are in a technical recession until after it has been sustained for that 6 month period of time.
People were declaring recession in 2020 during the crash, but that did not actually materialize. The market recovered for a time, and brought us where we are today. We are still far from declaring a technical recession in Canada; but it could happen.
If you want to talk about the real estate market in Windsor, or to look at houses & condos, give me a call, 519-300-6464
