Many have noticed that the PEI real estate market has really become much more competitive and as a result the prices of PEI homes for
How can I upgrade, selling my current PEI home and purchase a newer, bigger, better home in this “red hot” PEI real estate market? This
You may be wondering given the extremely hot PEI real estate market if you still need to incure the expense of a Realtor® to help you in the sale of your house. Certainly homes are selling very fast on the island, especially in the under $300,000 category, you probably could sell your own property. However there are caveats to this and you should be aware of a number of potential pitfalls.
Realtors have access to a vast array of tools and historical data regarding your home and what it has sold for in the past as well as current sale prices of similar homes that have sold recently. Your agent will do what is called a Comparitive Market Analysis or CMA. This means they will search through recent and historical sales records of homes that are similar in size, location and features to your home and determine a suitable sales price. While any home, at any time, is worth only what the market says it is worth, this data provides a very useful starting point. Realtors will also take into consideration such industry insider ploys as pricing your home to look like an especially good deal to encourage more buyer interest. This usually results in a bidding war, frequently resulting in the final sale price being higher than if the home had been priced at its maximum to start with.
Realtors have access to a vast array of tools and historical data regarding your home and what it has sold for in the past as well as current sale prices of similar homes that have sold recently. Your PEI real estate agent will do what is called a Comparitive Market Analysis or CMA. This means they will search through recent and historical sales records of homes that are similar in size, location and features to your home and determine a suitable sales price. While any home, at any time, is worth only what the market says it is worth, this data provides a very useful starting point. PEI real estate agents will also take into consideration such industry insider ploys as pricing your home to look like an especially good deal to encourage more buyer interest. This usually results in a bidding war, frequently resulting in the final sale price being higher than if the home had been priced at its maximum to start with.
While you only need one buyer, multiple interested parties lead to price wars and a higher final sales price. You can only sell your home once and as it is your largest investment you want to realize the largest capital return. You simply can not expose your home to as large an audience as your agent can through MLS and multiple other sales channels.
Let’s assume you go the for sale by owner route. You find a buyer. Now you are on your own to take the deal from a hand-shake to a successfully closed deal. Realtors are part of a highly regulated industry that has tried and true ways of closing real estate deals. Your PEI real estate agent will follow the prescribed methods which will eliminate 99% of possible problems. Just the fact that the purchaser is being directed by a PEI real estate agent in of itself tends to keep deals on track.
However should something go wrong, firstly you can count on the organization of the real estate industry and your area real estate board to help find answers, but should your agent have made a mistake you can rest assured that all licensed Realtors are covered by Errors & Ommisions insurance and that you will be taken care of.
Really using an agent for your purchase or sale is simply a way of not having to worry or direct a process that you may be unfamiliar with and also knowing that you have peice of mind should anything serious go wrong.
Finally it is important to realize that PEI real estate agents, like all Realtors are paid commission based on the value of the sale. It is in their best interest to do everything possible to ensure you get a higher price for your property.
Higher price (in many cases), protection from legal issues, as well as piece of mind that your interests are being well represented all are benefits of using the services of a Realtor when selling the largest financial investment of your life, your home.
The PINK bar shows housing prices in the Maritime provinces for 2021. The BLUE bar shows housing prices in 2022. The PURPLE bar shows the increase in average housing prices between 2021 and 2022.
Here in PEI we have been going through an unprecedented increase in housing prices. Not that many years ago we had a buyer’s market and homes could be bought as low as $50,000 in some cases. Those $50K homes are now running closer to $200K. We have actually seen bidding wars, offers are presented without conditions and don’t even look at real estate unless you have a letter from your lender. There are just more buyers than there are sellers. It is a totally unbalanced market.
There are two factors that might have an effect on prices and availability in PEI. The first is that interest rates are beginning to climb to combat inflation and the second is that there is finally some new building going on here.
The question is “are these enough?”. Are you likely to see a sufficient reduction in house prices to make it possible for the first-time buyer to get in.
Housing costs in PEI have gone up over 23% and this figure is higher in Charlottetown and Summerside. The average home in 2022 sold for $335,700 up from $271,300 in 2021. However this is still not even close to Toronto or Vancouver.
Home prices across the country peaked in January and February this year and while in PEI it may not be correct to say pricing is down, it isn’t going up at the same rate. If the interest continues an upward momentum as forecast, then pricing might drop a bit.
Will this mean you will be able to buy a home. Perhaps not. If the only reason that home prices drop is that interest rate hikes are cooling the market then the issue is going to be increased monthly payments caused by interest. So can you afford these new increased mortgage payments? Perhaps a better question would be, will banks qualify you for the increased payment while even on a lower priced home. Further can you pass the government imposed “stress test” ie being able to qualify at a still higher interest rate to simulate what might happen. Further as inflation increases exponentially, gas, food, debt service and more, the average household budget is already stretched to the breaking point.
So really although the market is predicted to cool – before first-time buyers can jump in to the market it might need to freeze. A 30% fall in prices would only bring the market back to where it was in 2020.
Really the only way to effectively fight the high cost of housing would be a building boom. During 2020 & 2021 in the midst of COVID the lumber industry was shutdown and there was a scarcity of building supplies. This discouraged building and contributed to the current situation. Although there are more construction supplies available now and prices reduced considerably, there still seems to be a scarcity of available skilled labour. I am pleased to see that there have been more construction starts recently. We really need a push, perhaps with government help, to build more housing. I am talking something similar to the US in the 50’s. Only by increasing the supply in face of increasing demand will prices begin to stabilize. Not get cheap – but stabilize to a point where more people will be able to purchase.
The next year will be interesting indeed. Inflation is rising, interest rates are rising, what will home prices do? Stay Tuned and read the Island Real Estate Book for current information about the PEI real estate market
Awards achieved and held over the last 2 years by our office and many of our agents. Four of our PEI real estate agents are currently in the Top 50 Realtors in a field of 10,000 throughout Century21® Canada, based on 2019 sales (Units & Production).
Suze Orman
Ricki Renzi
Jane Austen
ANSWER: $8750
Under $1m you can purchase mortgage insurance allowing you to have a down payment of only 5%
ANSWER: $240,000
Over $1m you can not purchase mortgage insurance consequently your downpayment is 20% of the purchase price
ANSWER: #2 & #3
(both when the same agent represents buyer and seller and when different agents from the same agency each represent buyer or seller)
In PEI Dual Agency exists if both buyer and seller are using the same agent or different agents in the same office.
ANSWER: NO
When creating a real estate deal all conditions and agreements must be in writing. Verbal agreements are not part of any real estate contract.
ANSWER: $335,700
Check the article THE HOUSING MARKET MAY BE COOLING BUT DOES THAT REALLY HELP?
ANSWER: 23%
Check the article THE HOUSING MARKET MAY BE COOLING BUT DOES THAT REALLY HELP?
ANSWER: The difference between your home value and the amount you owe.
Equity is the value you own in the home ie in simple terms it is the difference between what the home is worth at sale and how much it would take to pay off the principal.
ANSWER: FALSE
When discussing interest a “point” is 0.01% or 1/100th of one percent interest.
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