Understanding the dynamics of falling real estate prices and their Impact on offers

Falling real estate prices

When real estate prices start to decline, the market undergoes a significant shift that affects both buyers and sellers in profound ways.

For sellers, falling prices can lead to tough decisions. For buyers, it may seem like an opportunity to score a deal. However, the dynamics at play are far more complex than they appear on the surface. Let’s explore what happens when prices drop and how it influences offers over time.

Why do real estate prices decline? There are lots of reasons, including:

• Economic factors: A slowing economy, rising unemployment, or declining consumer confidence that can cause prices to drop.

• Higher interest rates: When borrowing becomes more expensive due to increased mortgage rates, there can be fewer buyers, causing downward pressure on prices.

• Excess supply: From overbuilding or many sellers entering the market simultaneously, more sellers meaning fewer buyers per property.

• Seasonal trends and local factors: Prices dip due to seasonal slowdowns or changes in a specific area’s desirability.

These factors combined can create a buyer’s market, where supply exceeds demand and sellers are more likely to face challenges attracting strong offers.

How falling prices affect offers over time

As prices decrease, the behaviour of both buyers and sellers adjusts in response to the new reality. Here’s how the dynamic typically unfolds:

1. Increased buyer caution

When prices begin to fall, buyers think it may be cheaper tomorrow. Slowing down the market. Even serious buyers may take a “wait-and-see” approach, hoping prices will decline.

2. Lower initial offers

As buyers sense a shift in the market, they tend to make lower offers. Lowball offers become common, with buyers seeing properties that have had a price reduction and anticipating future reductions. Sellers may find themselves fielding offers significantly below their expectations.

3. Prolonged time on market

In a declining market, properties often take longer to sell. Buyers have many more options. Meanwhile, sellers are pressured to adjust their prices or accept offers they might have previously rejected.

4. Price reductions become common

If a seller is forced to sell because of personal or economic necessity, such as divorce, job relocation, mortgage payment increase, they will need to reduce their price to attract one of the few buyers out there. The sale price, added to a few more sales, will show up in the data and real estate agents will show their clients that offers should be based on recent sales numbers, causing lower offers.

When dealing with sellers, valuations are based on many factors. A big one is recent sales. That can cause lower listing prices. This is especially true with commodity housing (properties that have many similar homes for sale in the area). This cycle may repeat until enough buyers enter the market looking to buy for the first time or upgrade.

With enough buyers, inventory shrinks, buyers may realize they need to act now before the deals are gone. Prices can begin to stabilize.

5. Buyer confidence grows over time

Once the market stabilizes at lower price levels, buyers may regain confidence and begin making more competitive offers. However, during the initial stages of a price decline, uncertainty often keeps offers low and negotiations tough.

The emotional toll on sellers

For sellers, a declining market can be challenging. A seller’s expectations, when prices go up, adjust quickly. However, when prices go down it is not so easy to simply expect less. Sellers who purchased at higher prices may also face the reality of selling at a loss, especially if they’re under financial pressure to move.

Unique properties are somewhat shielded from some of the market dynamics, but only to a point. There are usually fewer buyers looking for those places to start with. Waiting for that perfect buyer who wants your place because it has the perfect school nearby, its proximity to work, their bestie lives on the same street or is close to that great gym, can pay off but it can be a long wait.

In such a market, sellers must be flexible and realistic. Understanding the local market dynamics, working with an experienced real estate agent and pricing the property competitively from the outset are crucial steps to attract serious buyers and avoid prolonged time on the market.

Remember you might not feel the need to accept reality but you still need to live in it.

If you have suggestions for other real estate-related articles, please email me at [email protected].

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Exploring senior living options in the B.C. Interior

Finding a place for seniors

Real estate listings and sales data show it's a buyer's market right now

Advantage real estate buyers

I’ve been asked what is happening in the real estate market with increasing frequency in the last few months.

I decided to take a closer look, using just the numbers from a one-week period (not including recreational properties).

The numbers don’t show a complete picture, one worth a 1,000 words, so maybe just 800.

My analysis will examine the dynamics between new listings, existing inventory and completed sales, highlighting the balance—or imbalance—between supply and demand in different segments of the market.

From entry-level to luxury homes, the distribution of active listings compared to sold properties is definitely showing us a few things. (This is only MLS data, private sales are not included)

In the past week, according to numbers from the Association of Interior Realtors, a large portion of the British Columbia Interior real estate market had a total of 8,444 existing listings. During that same period, 317 sales were recorded and 425 new listings were added.

Those listings were spread across a range of price segments including:

• Up to $250,000—569 listings and 28 sales, a ratio of 20.32 listings per sale. The lowest price range has a substantial oversupply, likely leading to longer listing times. That is big buyers’ advantage.

• $250,000-$500,000—1,784 listings and 85 sales. That price segment also showed an oversupply, with a ratio of 20.99 listings per sale. Although demand exists, buyers have the advantage in negotiations and sellers may need to be flexible on pricing.

• $500,000-$1,000,000—3,598 listings and 151 sales. While this segment is the most active, the listings-to-sales ratio of 23.82 indicates an oversupply, with buyers having a wide range of options, sellers not so much.

• $1 million-$2 million—1,895 listings and 50 sales. The higher-end market shows a significant oversupply, with a listings-to-sales ratio of 37.9. That reflects slower movement due to a smaller buyer pool, often resulting in extended time on the market.

• Over $2 million—598 listings and three sales. The luxury segment has the slowest market speed, with an exceptionally high ratio of 199.33 listings per sale. That suggests the luxury market is extremely oversupplied. If you have a few extra millions of dollars kicking around, it looks like the time to scoop up a good deal.

The majority of listings fall within the $500,000 to $1 million range, reflecting high inventory in the mid-market segment, which typically targets families and mid-range buyers. The $250,000 to $500,000 range also has a significant number of listings, attracting first-time and budget-conscious buyers.

The majority of sales also occurred in the $500,000 to $1 million range, with 151 transactions, showing that demand in the mid-range market is strong. However, the high-end market (over $2 million) saw only three sales, indicating significantly lower activity among luxury properties.

The new listings-to-sales ratio provides insights into market speed, showing the balance between the rate of new listings entering the market and sales. A higher number means it’s good for buyers and bad for sellers.

New listings-to-sales ratio = 425 new listings / 261 sales = 1.63

A ratio of 1.63 suggests a buyer’s market in the short-term, where new listings outnumber sales, giving buyers more options and putting less pressure on them to act quickly. I have also noticed the number of new listings versus sales has come down, possibly indicating people are deciding not to put their homes up for sale as readily as before. I also noticed a higher incidence of cancelled and expired listings just over the last while.

For a broader perspective on market dynamics, the existing listings-to-sales ratio highlights the balance of supply and demand in the current inventory:

Existing listings-to-sales ratio = 8,444 listings / 317 sales = 26.63

This high ratio of 26.63 indicates a slow market overall, with a significant surplus of listings relative to sales. This dynamic favours buyers, who can take advantage of the high inventory.

Simply put, 26 places are for sale and one will sell. Next week, there will be 27 places for sale and one will sell. Then 28 places and one sells. Rinse repeat.

I do this analysis—usually once a week or so—not in great detail but for clients in specific price ranges to let them know what is happening in their market range.

To give a little context, I pulled some information from 2022, 2023 and 2024. For the month of September 2022, in single family residential, there were 1,162 active listings in the Central Okanagan, in September 2023 1,230 and this September 1,727. That works out to about a 60% increase over two years.

There were about 50% more sales in September 2022 than in September 2024, meaning far less for sale two years ago and about 50% more sales. Our ratio of sales to listings is far and away higher than just two years ago. Simply put, way more homes are for sale and far fewer are being sold. The turnover rate has substantially come down.

The big take away is, if you own a property (in a segment) where there are several other similar properties (commodity housing), it’s important to be aggressive in your pricing if you want to be the one in 26 that sells.

If you have suggestions for other real estate-related articles, please email me at: [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Real estate agents do more than plant a 'For Sale' sign in your yard

Estate agents' many hats

What exactly does a real estate agent do? Everything, at least we real estate agents like to think so.

You’ve seen them, dressed to the "sevens," perpetually on the phone. Real estate agents are a breed of their own, juggling roles from therapist to negotiator to, sometimes, amateur plumber. But what do these people actually do?

If you think it’s all about putting a sign in the yard and collecting commission checks, think again. Get ready for a peek behind the curtain at what your friendly neighbourhood real estate agent really does.

I thought I might take a fun look at how some real estate agents see themselves, and there is a lot of truth in it.

Sometimes they act as a therapists. Think about the stress of buying or selling a house. Throw in some anxiety about finances, with a dash of future regret. That’s what most clients bring to the table when they meet their real estate agent. Part of the agent’s job is calming nerves and talking clients off the metaphorical ledge.

From the start, your agent is there to listen to every concern, dream and dramatic rendition of your ideal “open-concept kitchen.” “Verbal Valium” can help soothe your fears about market crashes, the offer that collapsed and the “will-I-like-my-new-neighbours?” fear.

They can help navigate bidding wars and convince you that yes, it is possible to find a home with a pool and a low price point. A good real estate agent is a little like a professional matchmaker except they’re introducing you to your dream home or introducing your home to its next loving owner. And just like in matchmaking, there’s more to it than meets the eye.

Agents often have to read between the lines of what clients say they want, what they actually need and often what they can afford, walking the fine edge between a wish-list and mortgage payments, showing properties you love and then introducing a few unexpected options to see if your eyes light up and, of course trying to stay on budget.

If you’ve ever negotiated with a teenager over how much video game time is fair or when curfew should be on Friday, you know that negotiation is an art form. Imagine doing that but instead of bargaining over an extra 30 minutes, you’re haggling over thousands of dollars, repairs, the hot tub cover and closing dates.

For buyer or seller, the respective agent is always trying to get the best deal.

Want to knock $20,000 off the asking price because the tiles in the kitchen look “a little 2008”? Your agent will present that case with a straight face and make it sound completely rational.

Selling a house is more than just sticking a sign in the front yard and hoping for the best. Your agent is also your personal marketing team, creating snappy listings that read like poetry—“Spacious bungalow with vaulted ceilings and a backyard oasis”, and making sure the photos make the tool shed look like a million-dollar home.

The open house is where your agent will spend the afternoon sweet-talking strangers, explaining the smell of cookies is definitely not a ploy to distract from the four different wallpaper patterns in the living room.

They’ve got an answer for every question, from “What’s the resale value of a home near a cemetery?” to “Should I buy now or wait for the market to crash?”

They’re also the ones who’ll walk you through the reams of paperwork involved in a real estate transaction (I often joke we sacrifice a tree every time we do a deal), translating dense legal language into something resembling English.

Real estate agents definitely wear many hats. They’re also problem solvers. Did the home inspector discover a raccoon or squirrel family living in the attic? They know a guy. Did a neighbour’s cat decide to make your freshly staged home its personal nap zone? No worries a lint roller and some treats and we’re good. Sometimes, they’re even called on to handle minor repairs themselves when an unexpected issue arises during a showing. Most agents can make a stubborn toilet flush (never fun), tighten a loose doorknob or fix a sagging curtain rod.

No matter the market, the client or the hours, real estate agents keep their optimism alive. They know that behind every difficult transaction there’s a family waiting to find their home or a seller ready to start the next chapter. That’s why they keep going, tirelessly answering calls at all hours, smiling through challenging negotiations and celebrating every victory, big or small.

So, the next time you see a real estate agent’s face on a “Sold” sign, remember, they’ve done a lot more than put a house on the market. They’ve counselled, negotiated, marketed, problem-solved, possibly flushed and smiled through it all.

If you have suggestions for other real estate-related articles, please email me at [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.