A lot of experts are throwing around the term “buyers’ market” these days. If you look at the stats, you'll see sellers aren’t in the driver’s seat anymore. But does that mean buyers are?

Inventory is up an astounding 44% year-over-year and 11% month-over-month, and Right At Home Realty has the highest number of active listings we've seen in a long, long time. Supply is outpacing demand, which means buyers face less competition and less pressure, and have more opportunity for negotiation on price and conditions.

But today’s buyers probably don't feel like they have much of an advantage. Despite the fact that there are way more listings out there, sales have dropped by more than 7% over last year. Affordability and lack of confidence are huge factors: buyers simply aren’t biting.

Buying Power is Down

How have rising costs and interest rates affected the average buyer? Let's look at someone making $100K a year, with 20% to put down, a 30-year amortization – and no real debt to speak of.

  • In mid-2016, they would have qualified for a mortgage of just under $800K, paying an interest rate of 2.3%.
  • In February 2022, that same buyer would qualify for $600K at 5.25%.
  • Today they'd be only able to borrow $450k – at 8% interest based on the stress test.

Buying power has been cut in half, so it’s really no surprise that buyers – and first-timers in particular – are frozen on the sidelines.

Lack of Affordability is Driving the Rental Market

At Right At Home Realty, we’re still seeing a decent number of transactions, but a much higher percentage are lease transactions. People priced out of the market are turning to rentals, which is what’s driving up demand in that market, along with the continued influx of immigrants and foreign students. Our agents are focused on doing what they can to help their clients – and right now, that means finding them rentals.

What Can Buyers Do In this Unfriendly Climate?

Go in with realistic expectations. Work closely with an agent and a mortgage broker to figure out your price range – and focus on the area or property type that's actually accessible to you. And while that may not be ideal, going in prepared will offer a clear picture of what you can (or can’t) buy, and give you a place to work from instead of jumping in, racing around looking for something, then being disappointed.

READ: Expert: Interest Rates Are Putting The Brakes On Buying

Get creative. Borrow money from family or get them to co-sign. Go in on a duplex with someone else. Buy a place that has a basement apartment or an extra bedroom you can rent out.

Wait for even more inventory. Real estate market intelligence firm Edge Analytics recently reported a sobering stat: the share of mortgage owners thinking of selling because they can't afford their payments has more than tripled in the last year.

Many people who took on variable rate mortgages without fully understanding what that meant are now in a real bind. And homeowners renewing 5-year fixed mortgages are getting hit hard too, with payments often more than doubling at renewal. It’s an unfortunate situation, but it will open up opportunities for buyers as more inventory comes on the market.

Be aware: we won’t be seeing bargain basement prices. Despite the market, the average selling price in the GTA is higher than it was this time last year. Sellers still have high expectations, and while we’re certainly seeing those who are willing to negotiate, prices aren’t coming down significantly. Immigration is keeping demand up, and fewer new homes are being built, resulting in limitations on the supply side.

How Long Will It Be Before the Scales Tilt Back Into Seller Market Territory?

We don’t have enough housing, and there aren’t enough new homes being built. Interest rates are keeping people from buying right now, but I think that as soon as they start coming down again — or even just level off with a few subsequent rate holds – demand will be back in full force, and things will shift quickly back to favour sellers as competition and prices heat up. But until then, people are stuck. Buyers and sellers are facing tough challenges, and both sides are frozen – just for different reasons.

In next month's article, I'll focus on the other side of the equation, explore some of the challenges this market poses for sellers and look at what they can do to succeed in a difficult situation.

This article was produced in partnership with STOREYS Custom Studio.