The Canadian real estate market has cooled.Here’s what to expect this fall

After the COVID-19 pandemic boosted Canada’s economy, the property market is showing bearish signs as home prices drop and the bidding war unwinds.

That’s welcome news for prospective customers who want a better price. But as the busy fall season approaches, realtors and economists are divided over how long the price decline will last and how far it will go.

“Fall will be interesting because we probably have more buyers jumping into the market and we don’t need a lot of buyers to keep prices a little more stable,” said John Passalis, president of Realosophy. Realty Inc. of Toronto.

“A tiny boost in demand can be the difference between a home that sells in three or four weeks and one that sells in two weeks or much sooner.”

Average home prices are still above pre-pandemic levels, but rising mortgage rates and inflationary pressures are weighing on the market.

When the pandemic lockdown began in March 2020, the Toronto Area Real Estate Commission said the average home price in the area (one of Canada’s hottest) was $902,680. Last month it was $1,074,754, up 1% from July 2021 but down 6% from June 2022.

Prices reached $629,971 in July, down 5% from $662,924 in July last year, according to the latest data from the Canadian Real Estate Association (CREA). On a seasonally adjusted basis, it was $650,760, down 3% from June. When the pandemic lockdown started in March 2020, the national average price was $543,920.

The association projects that the national average home price will rise 10.8% on an annual basis, reaching $762,386 by the end of 2022 and reaching $786,252 in 2023.

Some economists, however, expect even sharper price cuts.

In June, three Desjardins economists expected the national average home price to fall 15% between its February high of $817,253 and the end of 2023. We have adjusted our projections to 2023. August forecasting a decline of between 20 to 25 percent.

Randall Bartlett, Hélène Begin and Marc Desormeaux wrote in a report released on July 11, ‘Housing prices continue to fall and we need to go further to find a bottom.

“That said, we still believe home prices will remain above pre-pandemic levels nationwide and in all 10 states through 2023,” he said.

Real estate brokers have found prospective buyers on the sidelines of the market in recent months in anticipation of falling prices. Sellers, on the other hand, have come to terms with the fact that their homes will not earn as much as they did at the start of the market. Year.

Lori Fralic calls this a “stalemate”.

A Vancouver agent for Keller Williams Realty Van Central said it was “looking at lowball offers.”

“There are a lot of bargain hunters throwing offers, but if they don’t have to sell, a lot of sellers are saying, ‘No, sorry, don’t take it.'”

This is a change from the ferocious pace of sales and heated bidding wars seen earlier this year and late last year.

Much of the change has been attributed to mortgage rates, which reflect fluctuations in interest rates and can erode purchasing power.

The Bank of Canada raised its key rate by 1 percentage point to 2.5% in July, the country’s largest rate hike in 24 years.

Economists expect the rally to continue, and Fralic says he’s encouraging people who don’t need to buy right away to hold off.

She said British Columbia has seen prices drop, but not as much as many expected.

“If people think[the price]will plummet, I don’t think that’s accurate,” she said.

“If you look at the 10-year averages in Metro Vancouver, house prices have risen significantly, and if they do fall, they may fall slightly and rise again. There has always been.”

The area’s composite benchmark prices are often the hottest in Canada, surpassing $1.2 million in July, up about 10% from July 2021, according to the Greater Vancouver Real Estate Commission. 2% down from June 2022.

“Nobody knows how much the price will go down,” said Sherry Cooper, chief economist at Dominion Lending Centers.

Markets tend to be very localized, and the spikes and dips seen by one person may not be replicated by another, she said.

Alberta, for example, has not seen the slowdown it has seen in many other Canadian markets because its energy sector is much stronger than it used to be, she said.

But Cooper noted that home sales activity has fallen very sharply in the Greater Toronto area, the Greater Golden Horseshoe area, and parts of British Columbia around Vancouver.

“The biggest correction has been seen in markets that experienced a 50% rise in home prices, the highest mortgage backlogs and the most expensive homes in Canada, so that’s what you’d expect. “

This report by the Canadian Press was first published on August 24, 2022.

The Canadian real estate market has cooled.Here’s what to expect this fall

Source link The Canadian real estate market has cooled.Here’s what to expect this fall

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