Where did the holidays go? Is it just me, or did they reduce the 24-hour day by 8 hours? I can remember sipping beer on a patio celebrating Canada Day like it was yesterday and December 31st 2022 seemed like a lifetime away. But now it's come and gone, and 2023 is already upon us. Forget ‘were you naughty or nice’, now it's 'have you planned' and 'are you prepared for the year ahead?'

Back in November, when you were just trying to get through the rest of the year, you forgot to strategically plan for what has been billed as 'the most challenging year in decades'. Do I believe that? No I don’t. Yet, do you think our leadership team didn’t take a day back in November to plan 2023? Well we did, and I’m happy to say that we have a strong foundation to take us through whatever 2023 sends our way. So what is your strategic plan for 2023?

2022 was a year of new beginnings, whereas 2023 is a year to build on the foundation you have built. It’s time to take stock of your assets/pillars, like education, technology, culture, platforms and workflows. How are you going to enhance what you worked so hard to create?

It’s not about shiny and new, but about leveraging what is tried and true. So how do we juxtapose our existing pillars against an uncertain backdrop which is 2023? Let’s start by examining trends and bellwethers that could help shape our 2023.

Is It Going Online or Offline?

A recent study by professional services firm JLL said that 90% of respondents plan to spend time in shopping centers, though most will research online first. The National Association of Realtors (US) 2022 Profile of Home Buyers and Sellers, underscores this trend of research first. Back in 2014 the NAR study found that 70% of home sellers contacted 1 agent before selecting an agent to list their property. In 2022, NAR reports that 80% of home sellers contacted 1 agent. A difference of 14%, as far as buyers interviewing only 1 Buyer agent, it has been unchanged at 67% in 2014 and in 2022. What this is telling us is that consumers are researching you way before they call you in for an interview. What are you doing to facilitate that research, and how are you coming up as the agent of choice in your niche or neighbourhood?

Reviews - Deal Maker and/or Deal Breaker

What’s a no cost or low cost way to boost your credibility? Reviews of course. Have you made review management a priority for 2023? Most online research for a product or a service involves some sort of review research. When a consumer researches your reviews, what are they going to find? Reviews and surveys, if done properly, are a way to get honest feedback, and can be a cornerstone of your business strategy.

What I mean by that is, reviews can guide you in the right direction, and help you decide where to put resources into your service offering. A simple strategy is to get all your reviews and highlight the word concepts that repeat themselves. Tally the numbers for each concept and look at the areas where you have large numbers. For example, ‘extremely responsive’ and ‘gave good advice’ are attributes of your brand and should be woven into all your communication. If you had statements like ‘stress-free’ or ‘extensive knowledge’ mentioned the least, that means that you weren’t consistent in these areas. You must create a system or a checklist that will improve these skills in order to create a smooth and stress-free experience.

What Are The Emerging Trends in Mortgages to Keep An Eye On?

The rise of the vendor take back and/or the assumable mortgage is just something that old REALTOR®s like to talk about as mortgage rates rise. It has some merit, but in today’s strict lender climate, this concept has no legs, and furthermore as inflation numbers come in line with the BOC’s 2% threshold, rates will begin to come down and it may prove to be unnecessary. I could see it being an interest revenue source for seniors selling their home without a mortgage, and offering a first mortgage to the buyer.

Scotiabank has come under fire recently for their Cash Back Program, for switching to a fixed mortgage. They have begun to target their adjustable-rate mortgage customers who may not have the stomach for rising variable rates. Banks are notorious for using cash-back incentives to drive profits and market growth. When a bank offers you an incentive to lock in your mortgage, they ain’t doing this out of the goodness of their hearts. They know these rate hikes are coming to an end, and are preying upon consumers during this time of perceived uncertainty.

Have We Reached The Peak on Interest Rates

Well, if we haven’t after 7 straight increases, we must be pretty close. However, our inflation numbers tell another story, so I wouldn’t be surprised if there is another quarter point increase on January 25th, 2023. Remember, long term rates are fueled by the bond market. Currently the bond yield is slightly over 3%, and back on December 8th the bond rate dropped to 2.74%. The bond market is telling us the worst may be over on the fight against inflation, and that bodes well for long term rates. If you have a difficult time stomaching variable rate increases, the strategy to survival is to hide under a 1-year fixed rate mortgage. Once all the dust settles, come out and lock in further or ride the variable rate downward. Look, interest rates are a smoke screen; don’t cloud your vision based on rates. The fundamentals for home price increases are looming. Learn to live your lives with higher rates for the short term, and take advantage of this once in a generation home price adjustment and plan to buy in the next 90 days.

Rent vs Own

I love when the real estate pundits say how home ownership is more expensive than renting. The only problem with this calculation is when mortgage rates drop, and indeed they will, and home prices begin to increase, will rents drop to pre-pandemic levels? Unless, there is some miracle supply of housing entering the rental market, I feel that rental rates will continue to rise, and outpace home price appreciation. What those who champion rental do not realize, is that there is always a portion of your monthly mortgage payment going towards equity (forced savings of sorts in a fixed mortgage scenario), when you rent its all going to your landlord. Keep a watchful eye on rental rates, currently a one bedroom costs more than $1700 a month in Hamilton and nearly $2500 in Toronto. These rental rates are a bellwether, they can help you position your messaging around how renters could become buyers, and push your investors to come back into the market.

Back To The Office We Go in 2023

Recently, Waze reported significant increases in commuter traffic for the periods between January 2021 - October 2021, and January 2022 - October 2022. This 10 month period showed Quebec City was up 263%, Kitchener-Cambridge-Waterloo with a 173% increase, Calgary at 172% and Hamilton saw a 161% increase in commuter traffic. As the frustration of the commuter increases, so does their desire to live closer to their employment. Keep an eye on these numbers as they can really give rise to real estate in this various employment hubs.

The Wild Card for the Housing Market…..Immigration

New comers in Canada are growing at a rapid rate, with 23% of the population (8.3 million people) who were, or had been a landed immigrant or permanent resident. By 2041, Canada predicts that percentage to be 34%. Studies show that nearly 50% of immigrants purchase a home within 2-5 years of renting. Do the math kids…demand will more than outstrip supply, its just a matter of time.

What Should We Unlearn From 2020 and 2021?

Annual home price escalation in the neighborhood of 20% to 30%, was a once in a lifetime phenomena. However, I’m not discounting the fact that in the past, where it took 7 to 10 years for home prices to bounce back after a large increase, (Canada 1990-1997/98 and US 2008-2020), under the current shortages, high cost of construction etc., these timelines will be compressed to half the time. That’s good news for those who bought homes in the peak of the market, Q1 of 2022. Move-over buyers may have a reprieve, and may not have to move hundreds of kilometers to achieve affordability. If the Ontario government got it right by releasing Greenbelt lands close to existing urban centres, then the outskirts areas over time may feel the pinch through a drop in demand. Stop listening to how the real estate market in 2023 is going to drop 5% , 10%, 15%!!! My question is from when? From the peak of March 2022? When you take the composite benchmark price in Ontario, from November 2020 to November 2022, the actual benchmark price is up 22.4%. Normal housing market annual appreciation is between 3-7%, the past 2 years, was like 4 years of normal appreciation.

Who Will Be Who will be in the Drivers’s Seat in 2023?

2022 started with sellers firmly in the driver’s seat. As months of supply went to weeks of supply, and the average listing to sales ratios went to 112% of the asking price, those days soon perished with a 25 bases point increase in the overnight rate in March of 2022. The tables turned and buyers began to emerge as the ones in control of the market. The rest of the year created an environment whereby buyers were firmly in the drivers seat. How will 2023 shape out with this age old power struggle?

If history has it's say, then follow this closely. There have been 7 Bank of Canada rate hike periods in the last 30 years (1994-‘95, 1997-‘98, 1999-‘00, 2002-‘03, 2004-‘07, 2010-‘11 and 2017-‘18). The average unit sales decline of all these periods is 11%, currently Hamilton-Burlington is down 29.2%, Oakville-Milton is down 32.7%, and Niagara is down 34.9%. When you take the average sales level after 24 months it surges up 14%. We are almost a year into this interest increase period and we may have another 1 or 2 quarters to go of unit sales levelling off, followed by a period of double digit increase in unit sales. Buckle-up everyone, the steering wheel is going to change hands!!!