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Mike speaks to the Media about current market:

Buy High, Sell Low: Why some Homeowners are Feeling the Pain of a Big Financial Loss

The silver lining, realtors say, is that lower prices are making homes more affordable for more people. Brent DavisReporter
It’s age-old advice for investors: buy low, sell high.

But what happens when that scenario gets turned on its head?

It’s a situation that’s playing out in real estate markets across Ontario and beyond — buyers who purchased homes and paid a premium as the frenzied market peaked a few years ago, and now find themselves trying to sell in much calmer, and lower-priced, times.

And that can mean locking in a considerable loss.

“There’s one I even experienced first-hand where I saw someone lose almost $500,000, so it’s a significant number,” said Brian Santos, managing broker for RE/MAX Twin City Realty in Waterloo.

“It is emotionally very difficult to go through this process. Oftentimes, it’s like their savings are just going away,” he said. “But sometimes people have no choice.”

As Santos says, “life happens,” and there are all sorts of reasons why people may have to sell their home at an inopportune time.

Sometimes it’s a separation or an estate sale following a death. A new job can mean a move to a new city; a lost job can force a sale. Higher interest rates may have pushed ownership costs to unsustainable levels.

A few years ago, when low mortgage rates and low housing inventory crashed into higher demand during the pandemic as people looked for more space and homes doubled as offices, house prices went through the roof.

In Waterloo Region, the average price for all residential properties peaked in February 2022 at $1,009,394, with detached homes selling for an average of $1,183,626.

Prices have cooled off substantially, with some fluctuations, since then.

For June, the Cornerstone Association of Realtors reported an average price for all residential properties of $729,650, a decline of nearly $280,000 from the market peak.

The average price for a detached home last month was $834,730, down almost $350,000 since February 2022.

There are stories of extreme losses in the Greater Toronto Area, like the Brampton home that sold recently for $950,000 less than its 2022 purchase price.

That’s not as likely closer to home in Waterloo Region, where average prices are lower to begin with, but the declines can still be significant.

Santos cited one-bedroom condos that sold for more than $600,000 a few years ago that are now selling for half that.

“My heart aches for people that are suffering losses on their property, but the silver lining is that homes now are more affordable for people,” said Santos.

“I’m seeing some that are now able to jump into the real estate market and make that dream of home ownership possible.”

Investors are among those who may have paid a pretty penny for a property, only to be selling it now.

Higher mortgage interest rates and lower rents mean some investment properties aren’t proving to be very lucrative. The sharp drop in international students in the region has dropped demand, in turn, for investor-owned student rentals.

“A lot of investors have now pulled out of the market where the numbers are not working for them,” Santos said.

“The student condo market has been particularly hard hit,” Mike Milovick, broker with Waterloo’s Royal LePage Wolle Realty, said in an email.

“This massive departure of tenants has caused problems throughout (Kitchener, Waterloo and Cambridge),” he said, but most noticeably in Waterloo, where a lot of buildings are designed for student living.

A recent look at the market showed about 100 student condos for sale within a kilometre of Wilfrid Laurier University; about 10 of those were power of sale, where an owner has defaulted on a mortgage and the lender steps in to sell the property to recover the outstanding debt.

Across the region, there were more than 120 multi-residential properties listed. Over half were duplexes, and most were vacant, Milovick said.

“During the pandemic, you might see maybe 20 between the three cities.”

Milovick said he’s been getting calls from clients asking about the rental market situation in the area.

“They have upcoming vacancy or are experiencing vacancy — on properties they have owned for many years — that have never had historical vacancy before.”

Santos said over the longer term, people usually do well in seeing real estate as a good investment.

“Short-term, it’s more challenging,” he said. “If you can hold on and wait, time often heals wounds.”

Brent Davis
Brent Davis covers business and breaking news for Waterloo Region Record.

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