Life for a real estate agent is always a bit like riding a rollercoaster. The housing market goes up, the market goes down, and it all happens due to market forces well outside any agent’s control.
Even by the standards of real estate, 2020 has so far been a wild ride.
“At the very beginning, before the pandemic hit, it just looked like a normal year,” says Katie Knebel, an agent for Royal LePage who is very active in the Niverville market. “In January, you kind of get out of Christmas mode. ‘Okay, gotta get back to work.’ Then in February you really start ramping everything back up, gearing up for what you hope to be another very good year. But it’s just a little bit unknown every year. That’s just the real estate game, right?”
February was a busy month for housing starts and home sales, a fact borne out by the numbers. Agents and builders were teed up for one of their best years ever.
“Just before [the pandemic] hit,” says Doug Dyck of Heritage Lane Builders, “I would tell you that if you had talked to any realtors that have been in business for any time, they probably would have said to you that they felt they were having their best month in five years. I’ve heard that from more than one realtor. Now, that was pre-COVID.”
Another local agent, Clarence Braun, agrees that this was certainly his experience.
“I believe the present growth was building into 2020 even without COVID-19,” Braun says. “However, what then changed was the sudden lack of listings as many people became very hesitant to list their homes… they were being cautious and did not want people going their homes and risking contamination.”
Without a doubt, the arrival of the coronavirus brought the market to a standstill.
“Immediately in late March, all the listings and sales basically dropped to about 50 percent, almost exactly,” says Greg Fehr of Red River Group. “The sales went down first, and then people just started pulling listings.”
Fehr says that Red River Group has been closely tracking these numbers more broadly than Niverville, since they operate in so many communities throughout the rural southeast.
“Around March 15, that’s when the world kind of stopped,” says Knebel. “And there was just this sense of ‘I don’t know what’s happening,’ where I had the fear of thinking, ‘Okay, I may have to prepare myself for a very long year.’ Because we just have no idea what’s in store for us.”
The Turnaround
But then things started to turn around. Knebel says she noticed a little bit of a sales spike in May. Sales didn’t exactly skyrocket, but they came back and levelled off.
“Around the second week of May, you start seeing sales going from 50 to 60 percent of the previous year to 70,” Fehr says of his market observations. “But listings weren’t catching up, and they still haven’t quite caught up.”
As properties came back onto the market, it became a seller’s market, according to Braun. “The buyers were there, and with less inventory the prices for home homes went up,” he says.
Knebel says that the usual surge of spring activity, in her opinion, didn’t hit as early as it normally does, but by late June it had arrived.
“For me, the last couple weeks to a month have been very busy, and I don’t think it’s just me,” she says. “You can see it in the stats, in signs going up and signs coming down. I mean, the spring market has just exploded right now.”
In Niverville specifically, from January 1 until July 27, there were 81 houses sold. In the same period in 2019, that number was 71. For the market to have caught up, and then exceeded itself, means the recent surge has been very quick and very intense.
“There are pockets in Winnipeg were [properties] are going for ten different offers, with $40,000 over asking, and it’s absolutely crazy,” says Knebel. “There was a stretch in Niverville where we had eight or nine houses around the $300,000 mark, give or take, that were sitting there and then all sold within a week of each other. There was just this massive rush for homes in Niverville around that price point—and ever since then, it really hasn’t stopped.”
Driving Forces
Knebel believes a driving force has been the lack of mature homes—in other words, not new—in the range of $275,000 to $325,000. So when they do come on the market, they’re snapped up quickly.
Another reason for the surge, Knebel says, is a recent change to the CMHC (Canada Mortgage and Housing Corporation) rules which govern which sellers can be preapproved for a mortgage. A rule change that came into effect at the beginning of July made it harder for people to qualify for mortgages.
“This wasn’t just a minor little change,” she says. “You had to be more qualified to go through CMHC, and it could have changed people’s preapprovals by $30,000 to $40,000. So we saw a push right before then, where people [thought], ‘If we don’t buy something before July 1, we may be significantly impacted on what we can actually buy, what our borrowing power is.’”
Yet another factor is historically low interest rates. The rates started to plunge at the beginning of the year, and there hasn’t been any indication that rates are going to head back up anytime in the near future.
“So I personally don’t think it’s been one thing that has affected the markets this year,” Knebel says. “I think it’s kind of been multiple things affecting it. And are they all generally related to COVID? Probably yes. But I think Manitoba just steadily keeps moving along, like we typically always do. We have one of the most stable markets, and I think during COVID we’re proving that to be true.”
Fleeing the City
It’s always been true that a subsection of people living in cities have looked at rural communities and seen the appeal of larger lots, more space, and a quieter lifestyle. This has generally been true in southern Manitoba for quite some time.
But Fehr has a theory that this trend has been accelerated since the onset of the pandemic, that many people are seeking to escape dense population centres right now.
“In Toronto, they’ve got quite a bit more data, so they were able to prove this a little bit quicker,” Fehr says. “But there’s been probably about a 17 to 18 percent increase in the amount of people seeking rural properties, or at least very small urban areas, outside of Toronto. I think we saw that back in about April too. I don’t know if there’s quite enough data yet to prove it [in Manitoba], but there is definitely a higher demand for rural property right now than ever in the past, and some of this has got to be driven by a little bit of fear… I think people are just looking for these bigger rural lots where they can grow their own gardens again and be a little bit more self-sufficient.”
He says communities like St. Adolphe, Ste. Agathe, Niverville, Île-des-Chênes, Lorette, and to a certain extent even Steinbach are recovering faster than Winnipeg for this reason.
“Buyers have been wanting to move out of bigger urban areas and move to smaller communities,” agrees Braun. “COVID-19 really put the focus on staying away from tighter spaces and bigger urban centres. So any buyers who had an inkling to sell maybe have been influenced by that.”
Knebel says Toronto could be a bellweather in terms of that trend, because the market is so much larger and the property is significantly more expensive. Because of this, their housing market is more susceptible to housing shocks.
“I’ll give you a for-instance,” Knebel says. “My brother builds houses in Toronto, and he has a house going on the market that he’s renovated. It’s a 750-square-foot bungalow, finished basement, but built in the 50s on a postage stamp lot… and he’s listing it for $950,000. It’s insane.”
So What’s Next?
The question becomes, what happens next? Few people in January would have been able to predict what happened in March. And perhaps people now in August will have just as much trouble predicting where things will be in October.
“It’s a difficult question to answer, as we haven’t yet seen the fallout of businesses being closed during COVID-19,” says Braun. “We have seen government supports remain in place for the most vulnerable in the labour force, and even for business owners. We have also seen banks support homeowners and businesses as they navigate through this period. There could be some difficult days ahead as governments and banks seek to gain back the money they have leveraged to protect the country and its economy. What will job retention look like? Will there be enough new jobs added to pick up to where we were in February 2020?”
Knebel agrees that predicting the future is a fool’s errand at this point.
“I think in real estate, there’s always a sense of just riding the wave,” Knebel reflects. “You truly don’t know how it’s going to be. You put your head down, you push through, you work as hard as you can. But at the end of the day, it’s out of our control, as agents. And no matter how hard we work, how much effort we know we put into it, sometimes a pandemic comes along.”
“As of today, we are in a seller’s market,” Braun adds. “It’s just above an even or balanced market. Would any of the above scenarios occur—like government clawbacks of benefits—we could see some selloffs as homeowners try to use their equity to satisfy their financial requirements.”
For the time being anyway, the reality we’re seeing is fast growth. There may be some wisdom to the old adage that says “Make hay while the sun shines.” Because despite the uncertainty, despite the threat of clouds on the horizon, at the moment the sun is shining as brightly as it ever has.