An “Assessment” of the 2023 Real Estate Market
Tags: House Prices, Edmonton Real Estate, 2023 Real Estate Forecast, Property Assessments
There is a famous saying that goes: “May you live in interesting times”. It sounds pleasant, but it is intended as more of a curse. Many of us probably feel that some “uninteresting” times would be a nice change right about now, yet it seems like the only thing that is certain these days is more uncertainty.
No one can predict the future, but if you’re trying to make some big plans then all you can do is make the best prediction that you can, based on the best available evidence. Take the Oilers, for example. They SHOULD make the playoffs, given their track record of success over the second half of a season. Should you bet your house on it? Probably not. But it might make sense to plan some “wings and nachos” watch parties come playoff time.
And speaking of houses, there are plenty of headlines and concerns around the real estate market these days. To be fair, factors such as Covid, higher interest rates, and inflation are continuing to have noticeable effects on the market. But what is really going on? There are two main questions that people ask: what are properties worth these days, and what direction will the market take in the coming year?
Before we get to the future, let’s take a quick look at that first question: determining a property’s “value”. Many people ask about a property’s “assessed value” as a way to gauge that property’s “market value”. While those two figures MAY be close in a lot of cases, a property’s assessed value can be quite unreliable in estimating its current market value.
Municipalities base their assessments on value estimates from July 1 of the previous year using a mass appraisal approach. So not only is it out of date (relative to the prices being paid for homes in real time), it does not take into account the actual state of an individual property (for example, it’s condition, finishing and unpermitted upgrades). It is also used for municipal tax purposes and it is not meant to be a determination as to what a property can or should sell for. The real estate “market” (buying and selling) is where the best estimate of market value can be obtained. The market value is simply what a buyer is willing to pay, and a seller is willing to accept, for a given property under current conditions.
So how do we estimate a property’s market value? By looking at recent property sales. That tells us what people are actually paying for homes right now, under current conditions. But of course, there are many factors that can distinguish one property from another for comparison purposes so it is a good idea to consult a professional REALTOR® for a market assessment. REALTORS® know how to obtain relevant and accurate data, and they are trained in evaluating it.
So what will happen in the “market” in 2023? After a relatively hot 2022, the REALTORS® Association of Edmonton is predicting an average price decrease of 2.9% on detached homes and a 1.1% price decrease for apartment style condos. In terms of sales volume, they are predicting an 11.8% decrease in the number of single family detached home sales, but even with that decrease, the sales volume should still be higher than in 2018 and 2019. Also, the Association is predicting a 1.3% increase in the number of sales of apartment style condos. Essentially, this means we are expecting more of a balanced market that is falling back in line with pre-covid market conditions and trends.
Interest rates are certainly driving buyers to lower price points, but people are still buying; Alberta is still experiencing growth as people migrate here from more expensive areas in Canada, like Vancouver and Toronto. These opposing forces are helping to drive the market toward stability in 2023. Overall, no major price swings or overheated market conditions are expected.
At least from a real estate perspective, we are thankfully getting back to some less “interesting” times.