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Benefits of Building Modular in a Sellers’ Market
The real estate market can be volatile and unpredictable. Many outside factors can have an impact on the price and availability of homes in a certain city or region. Changing demographics, interest rates, the current state of the economy, and any Government policies such as tax incentives or subsidies can have an effect – not to mention global events like the COVID-19 pandemic (just entering its second wave at the time of writing).
When demand for homes is high and availability is low, we enter into what is commonly known as a “sellers’ market”. It is known as such because the environment favours those looking to sell a home, over those looking to buy a home. In a sellers' market, the low availability of homes means that any home going on the market is likely to generate more interest from potential buyers, who have fewer alternatives. This will often result in bidding wars that drive up the price of homes, making the potential for the seller to make a handsome profit more favourable.
In this blog post, we will examine the sellers’ market in more detail, focusing on the current (at time of writing) conditions in Prestige Homes’ key markets – Atlantic Canada and Maine. We will also take a look at why building new – and building modular in particular – can prove a great option when wanting a new home in a sellers’ market.
Examining the Sellers’ Market in Atlantic Canada and Maine
At the time of writing, we are experiencing a sellers’ market in most regions of Atlantic Canada as well as in Maine, U.S. This is demonstrated by statistics shared by various real estate associations. Let’s take a look at some of the evidence.
According to the Nova Scotia MLS Statistical Report for July of 2020, residential sales activity in the province saw an increase of 11.5% from July 2019. “This was also a new sales record for the month of July and was the second-highest level of any month on record behind June 2020,” says the report. Furthermore, house prices have been on the rise, up 15% in July 2020 from the same month last year to a record average price of $289,243 – a trend not limited to July, with the more comprehensive year-to-date average price reaching $277,940 as of July 2020, up 8.2% from the same period in 2019.
Meanwhile, new residential listings were down 5.1% from in July 2020 from the same month last year – another telling sign of a sellers' market situation.
“Overall supply is running at the lowest levels in more than a decade and continues to fall,” says the report. “Active residential listings numbered 4,334 units at the end of July. This was a large decline of 36.5% from the end of July 2019.”
July 2020 also saw a record total dollar value for combined residential home sales in Nova Scotia in a single July month. At $430.1 million, this constituted a staggering 28.1% rise from the same month in 2019, again pointing to quick sales occurring at figures above the asking price.
Residential home sales statistics distributed by Nova Scotia Association of Realtors (NSAR).
“It’s definitely a sellers’ market here right now,” says Prestige Homes Custom Home Consultant Kate Brett, of our Stewiacke, Nova Scotia Sales Centre. “Clients and Agents all have the same story: little inventory, quick sales, over the asking price.”
Statistics shared by the New Brunswick Real Estate Association (NBREA) tell a similar story of increased listings, record sales, and soaring average home prices. According to NBREA’s September 2020 report, home sales in September 2020 alone were up 33% from September 2019 – a new sales record for the month of September, with year-to-date numbers also setting a new record, and a 7.3% increase from the first nine months of 2019.
In fact, every region of New Brunswick saw year-over-year increases in sales activity in the first nine months of 2020, of at least 25% compared to 2019. “The average price of homes sold in New Brunswick was a record $194,326 in September 2020, a large increase of 31.4% from September 2019,” says the report, adding that the more comprehensive year-to-date price was $199,641, up 11.9% from the first nine months of 2019.
As we expect to see in a sellers’ market, in addition to increased prices, availability has been on a sharp decline in 2020. The 3,627 residential listings at the end of September represented a considerable 34.5% drop from the end of September 2019.
Residential home sales statistics distributed by New Brunswick Real Estate Association (NBREA).
Prince Edward Island, and Newfoundland and Labrador
The story of an uptick in sales and accompanying dip in the availability of homes isn’t limited to the mainland; it also extends to Atlantic Canada’s island provinces.
The September 2020 report from the Newfoundland and Labrador Association of Realtors (NLAR) led with the headline, “Newfoundland and Labrador home sales post best September on record”, going on to state that the month saw a large increase of 39.5% from September 2019, with the average price of homes sold up 7.7% to $256,663 for the same month.
While the fall is showing a steep rise in home sales, the trend for the year has also been greater sales and higher prices, particularly following the emergence of the COVID-19 pandemic. Resultantly, availability is taking a nosedive.
“The overall supply of homes on the market dropped sharply from historically elevated levels at the beginning of the year and has yet to recover,” says the report. It goes on to explain that active residential listings were down some 17.4% at the end of September 2020, as compared to the end of September 2019.
Residential home sales statistics distributed by Newfoundland and Labrador Association of Realtors (NLAR).
In PEI, a similar story of record September sales. According to the Prince Edward Island Real Estate Association’s September 2020 report, residential property sales were up 24.5% in September 2020, from the same month in 2019. Year-to-date sales were up 4.9% and the average price of a home in the first nine months of 2020 was up 17.2% to $274,619.
“Overall supply (of homes) continues to trend at historically low levels”, the report goes on. “Active residential listings numbered 711 units at the end of September (2020). That was a large decline of 30.6% from the end of September 2019.”
Residential months of inventory statistics distributed by Prince Edward Island Real Estate Association (PEIREA). The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.
The picture doesn’t look any different just south of the border in Maine, another key market for Prestige Homes. The Maine Association of Realtors pulls no punches in its September 2020 Housing Report, describing an environment where, “Buyers are anxiously ready and waiting for homes to come on the market.”
“Maine home sales jump 22.78 percent; values increase by 19.56 percent in September” is the report’s headline – statistics the association puts down to historically-low interest rates and “more buyers than sellers”. Average Maine house prices reached $273,500 in September 2020.
“September’s impressive sales volume capped a solid third-quarter recovery for Maine residential real estate,” Tom Cole, 2020 President of the Maine Association of Realtors is quoted as saying. “January through September 2020 sales are 2.6 percent ahead of the comparable time period for 2019—Maine’s best year ever.”
“Demand is being powered by historically-low mortgage interest rates combined with the allure of Maine’s quality of life and response to COVID-19 from across the country, while the supply of for-sale properties also remains historically low. With more buyers than sellers in most markets, we are seeing strong competition, faster sales, and increasing pricing,” says Cole.
Why Building New – and Building Modular – Could be the Answer
A sellers’ market is one that is favourable to those with a house to sell and not to those looking to buy a home. With the prices of existing homes on the rise, and availability on the wane, people will often look into building a home. If you are a homeowner in a sellers’ market, you may be considering selling your home while you can command a greater price for it. For those who have been considering downsizing, this may be the time, and building modular could be a favourable option. Let’s take a look at why.
Get what you want
Of course, one of the greatest arguments for building rather than buying an existing home at any time is the ability to customize your home to suit you exact needs or tastes. This is all the more the case when you are living in a sellers’ market, because less homes on the market means reduced chance of getting what you want, as well as increased competition for desirable homes.
Even if you find a home you like and outbid other suitors, are you in fact settling for a home in a less than ideal location? The chances of all those stars aligning – and at the right price – are pretty slim.
All this means that trying to buy an existing home in a sellers’ market can be an exhausting and deflating experience. There’s little worse than finally finding a home you love, only to be outbid or forced into paying a price you aren’t really comfortable with.
Building a modular home could be the solution. Prestige Homes offers a huge amount of customization in our homes. Decide on every detail to suit your tastes – from floorplan to finishes, because the only thing worse than having to live WITH a regret is having to live IN one!
“The only thing worse than having to live WITH a regret is having to live IN one!”
Guaranteed pricing and no cost overruns
You don’t want to remove yourself from the cutthroat world of the sellers’ market’s bidding wars and decide to build new, only to be hit by cost overruns on your new build. But that can often be a reality with a traditional “stick-built” home.
“With a conventional build, there is always the potential the price will rise through the building process – especially if outside circumstances, such as the COVID-19 pandemic, result in increased costs for materials such as lumber,” says Cherry Seely, Custom Home Consultant with the Prestige Homes – Moncton Design Centre.
When you build with Prestige Homes, you sign off on a price for your home before construction begins and then you can sit back safe in the knowledge that this price will not change.
“The only situation where the price would change is if the customer wanted to make a change after signing the contract,” Cherry adds. “With a traditional build, you could find the price increasing just because a sub-contractor missed something in their quote. You never have to worry about that when you build with us.”
No need for a construction mortgage
So, you’ve come to realize that the sellers’ market isn’t going to yield good results if you try to buy an existing home, and you’ve made the exciting decision to build new! But what’s this? You now find that your pre-approval for a traditional mortgage isn’t going to cut it now that you are looking for a construction mortgage?
That’s right – building a new (non-modular) home usually requires a special type of mortgage called a construction mortgage. With this kind of mortgage, funds are released gradually throughout the building process because contractors typically like to be paid at major intervals so they don’t have to carry the cost of the entire build. And here’s the kicker: It is typically harder to get approval for a construction mortgage than for a regular mortgage. Suddenly, your dream of avoiding overpaying on an existing home while getting exactly what you want by building new is scuppered. Unless you build modular!
With a modular home, you generally won’t require a construction mortgage. Why? Because all the details of your home, right down to the finishes, are decided upon and put in writing before the construction process begins. This means that, just like buying an existing home, the funds can be paid out in full once the build is complete.
New homes are built to the latest codes
New building codes are being introduced all the time, creating more stringent guidelines around the standards builders need to meet when building new homes. These codes help ensure the quality, safety, and efficiency of the home. So ask yourself, would you rather have a new home, built to the latest codes, or an older home that you would most likely overpay for in a sellers’ market environment?
Greater energy efficiency means lower cost of living
You might think that buying an existing home is going to give you the best bang for your buck, but when you look longer-term, this may not be completely true. While the price you pay for a “used” home might be lower than a new build, you have to take into consideration the condition of the building you are purchasing. That sticker price may look good now, but what about down the road, when a long list of maintenance work and repairs start piling up? It’s important to ask questions like: What condition is the roof in? How about that foundation wall? What about rot and mould? Is there anything sinister happening behind those walls?
The fact of the matter is that an older home – no matter how endearing – could come with a laundry list of expensive issues you’ll need to fix later. Furthermore, older homes weren’t built to the same stringent codes as new builds and are likely to be less energy efficient, which could end up costing you thousands in the shape of high energy bills over a number of years.
Throw into this mix the inflated prices being asked for existing homes in a sellers’ market, and you may just want to think twice about buying “used” over building new.
This could be the perfect time to downsize
If you’ve been considering downsizing, finding yourself in a sellers’ market may just be the final push you need to finally make the move. Perhaps your kids have flown the nest. Maybe you want to simplify life with less yard work and maintenance. Or, could it be that you simply find yourself with more home than you really need? There are many reasons to consider downsizing and now may just be the perfect time.
In a sellers’ market, you may be able to sell your existing home for a handsome price. If you are willing to sacrifice a little space, it is possible that you will be left with some funds to put away for a rainy day, or to spend on travel or another life passion.
It is important to remember, however, that this may not be as simple as selling up, building new, and expecting to be left with the luxury of piles of leftover cash. A sustained sellers’ market will inevitably push up new construction costs, too, so it’s important to be diligent in understanding exactly what you will pay for a new home, in addition to what you can expect to generate from the sale of an existing home, and to set your expectations accordingly.
Modular building never stops
Buying in a sellers’ market can be a frustrating experience. Even if you can find a home that checks all your boxes (and limited availability makes that less likely), you may find that it checks a lot of other potential buyers’ boxes, too. In other words, the best homes on the market are going to get a lot of attention, and will most likely generate a lot of bids. That makes overpaying or missing out completely because you were outbid on a home a more likely outcome.
By building new, you can avoid this emotional rollercoaster and just focus on building exactly the home you want, with no third parties bidding to disrupt your plans!
A modular builder like Prestige Homes is able to build many more houses than site contractors, thanks to our incredibly efficient factory building process. In a sellers’ market, where demand for new builds will also be driven up by the reduced availability of existing homes, site contractors are likely to hit a limit quicker than modular builders.
Furthermore, because we build indoors, we can start building at any time of year, which is not the case for a traditional “stick-built” approach. In short, sellers’ market or not, modular is always an option that you can get started with quickly.
Hey, it’s a NEW home!
And who doesn’t want a NEW home?!
Building may be more expensive, but isn’t that better than paying too much on a fixer-upper that requires future investment? And do you really want to be spending all your weekends trying to turn an older home that isn’t really “you” into something you can live with?
With Prestige Homes, your home is completely customizable, so you can have everything to your tastes right out of the factory – from the colour of your siding, to the number of bedrooms, right down to the kitchen cabinets and flooring. Choice is good!
Prestige Homes are Mike Holmes Approved!
Yes, THE Mike Holmes, of TV fame! Canada’s most trusted builder endorses Prestige Homes as officially Holmes Approved Homes. This is on top of our own, rigorous 360-point inspection process, and code inspections required by the CSA. That’s a whole lot of peace of mind that you just aren’t going to get buying an older home.
When you build modular, you will work with one of our Custom Home Consultants to plan every last detail of your home, before the build begins. Once it does, you can rest easy knowing that it is being constructed with these many layers of scrutiny all along the way. Even government building inspectors can’t watch every step of a build, but with Prestige Homes, you have the added assurance that experts are doing just that. (Including those Mike Holmes inspectors!)
We’d love to talk to you!
We hope this blog post provided you with new insight into the sellers’ market and that you will consider the benefits of building new, building modular, and building with Prestige Homes when market conditions favour sellers of older homes over buyers. If you are ready to start talking about the possibilities, find the independent Prestige Homes retailer in your area and give them a call, today!
Nova Scotia Association of Retailers (NSAR)
New Brunswick Real Estate Association (NBREA)
Prince Edward Island Real Estate Association (PEIREA)
Newfoundland and Labrador Association of Realtors (NLAR)
Maine Association of Realtors (MAR)
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