Buyers now more concerned about home prices than higher interest rates

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Buyers increasingly feel the pinch of high home prices more than they do the sting of higher interest rates, a new study shows.

That’s even the case in Edmonton, among the most affordable large urban markets in the nation, says Drew Carlson, realtor with eXp Realty in Edmonton.

“Price can be a challenge,” he says, referring to first-time buyers’ experiences currently in the city.

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“A lot of people don’t have that extra capital to deal with multiple offers and bidding up the price.”

A recent survey by Zoocasa reveals that, while many buyers cite higher interest rates still factoring in purchasing intentions, it also highlights that their top worry when looking for a home is pricing.

To that point, it found more than 42 per cent stated that rising prices are their primary concern whereas only about 26 per cent cited interest rates.

Their worries are understandable in markets like Toronto where the average price at the midpoint of the year was $1.162 million, down nearly two per cent year over year.

It’s also likely more buyers in Calgary, where the average price of a home was nearly $700,000 in late July, are feeling squeezed by rising prices, he adds.

Edmonton’s home prices remain far below those cities, with the average selling price for a single-family detached home at the end of June at about $539,000 and aggregate average price for all housing types at about $339,000, Realtors Association of Edmonton statistics show.

The relative low prices here have caught the attention of investors in recent months, especially from larger markets like Vancouver and even Calgary, Carlson says.

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“Investors are scooping up properties like crazy right now.”

In turn, investor demand has made competition among affordable homes, priced less than $400,000, more challenging for first-time buyers, he adds.

“Many are losing to investors, who are going in with unconditional offers.”

Often flush with cash and not requiring financing, investors are even purchasing properties site-unseen, he adds.

Local buyers can still find affordable homes to purchase in the city, although there are fewer single-family detached homes. Higher demand for townhomes and apartment condominiums have pushed their prices significantly higher year over year.

Year-to-date June 20, townhomes had an average price of about $290,000, up nearly 13 per cent, while apartment condominiums’ average price was nearly $212,000, an increase of nearly 16 per cent year over year.

Local realtor Nathan Mol says the survey likely reflects how many buyers in Edmonton and elsewhere are less concerned with interest rates because they are probably pre-approved for mortgages at the current rates.

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“The frustration likely kicks in when there is another buyer willing and able to pay more,” he adds.

First-time buyers are likely worried about both, given borrowing costs and home prices limit their choices. In contrast, move-up buyers are likely benefitting from high demand for low- to mid-range priced homes because they are selling into that market, and they are purchasing in the mid- to upper priced part of the market, which has more supply and fewer buyers, he notes.

That stiff competition for affordably priced homes is unlikely to ease anytime soon even if interest rates come down more than they have, Carlson says.

“I think we’re going to be in this kind of market condition for the next two years — at least.”

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