After fueling the Canadian economy during the COVID-19 pandemic, the real estate market is showing signs of weakness as house prices fall and bidding wars dissipate.
This is good news for potential buyers hoping for a better price. But as the busy fall season approaches, real estate agents and economists are at odds over how long and how low prices will be.
“The drop is going to be interesting because we’re going to probably see more buyers coming into the market and you don’t need a ton of extra buyers to provide a little more price stability,” John Pasalis said. , president of Realosophy. Realty Inc. in Toronto.
“A small increase in demand could be the difference between selling homes in three or four weeks and selling in two weeks or selling much faster.”
Average house prices are still above pre-pandemic levels, but rising mortgage rates and inflationary pressures are weighing on the market.
When the pandemic shutdowns began in March 2020, the Toronto Regional Real Estate Board said the average home price in the area — one of the hottest in Canada — was $902,680. Last month it was $1,074,754, up 1% from July 2021, but down 6% from June 2022.
The latest data from the Canadian Real Estate Association (CREA) shows prices hit $629,971 in July, down 5% from $662,924 last July. On a seasonally adjusted basis, it was $650,760, down 3% from June. When the pandemic shutdowns began in March 2020, the national average price was $543,920.
The association forecasts the national average home price to increase 10.8% on an annual basis to reach $762,386 by the end of 2022 and reach $786,252 in 2023.
But some economists anticipate an even greater drop in prices.
In June, a trio of Desjardins economists said they expected the average national house price to fall 15% from its February high — $817,253 — to the end of 2023, but because “we’re almost there,” they adjusted their forecast in August to predict a decline of between 20 and 25 percent.
“House prices continue to fall and still have to move forward before finding a bottom,” said Randall Bartlett, Hélène Bégin and Marc Desormeaux, in a report published on July 11.
“That said, we still expect house prices to end 2023 above pre-pandemic levels nationally and in all 10 provinces.”
In anticipation of lower prices, agents have in recent months noticed potential buyers sitting on the fringes of the market, while sellers come to terms with the fact that their homes won’t fetch as much money as they did at the start of the year. .
Lori Fralic calls it a “dead end.”
“We’re seeing lowball offers,” said the Vancouver agent with Keller Williams Realty VanCentral.
“There are a lot of bargain hunters throwing out offers, but if they don’t have to sell, a lot of sellers say, ‘No, sorry, I’m not taking it.
This is a change from the blistering pace of sales and frenetic bidding wars seen earlier in the year and at the end of last year.
Much of this change is attributable to mortgage rates, which reflect interest rate fluctuations and can reduce purchasing power.
The Bank of Canada raised its key rate by one percentage point to 2.5% in July, the biggest hike the country has seen in 24 years.
Economists predict the increases will continue and Fralic said they are already encouraging people who don’t need to buy immediately to wait.
She saw a drop in prices in British Columbia, but said it was not as much as expected.
“If people think (prices) are going to drop, I don’t think that’s accurate,” she said.
“If you look at the 10-year average for Metro Vancouver, house prices are going up and if they go down, they might go down a little and go up. along the way.”
The Greater Vancouver Real Estate Board said the composite benchmark price for the region – often the hottest in Canada – was more than $1.2 million in July, up about 10% from to July 2021 and a decrease of 2% compared to June 2022.
“Anyone can guess how much prices will drop,” said Sherry Cooper, chief economist at Dominion Lending Centers.
Markets, she said, tend to be very localized and the rises or falls that some see may not be emulated in others.
For example, she said Alberta hasn’t experienced the downturn of many other Canadian markets because its energy sector is much stronger than it has been in the past.
But Cooper noted that home sales activity has declined very sharply in the Greater Toronto Area, the Greater Golden Horseshoe area and in parts of British Columbia around Vancouver.
“The markets that saw the 50% increase in house prices had the biggest correction, and that’s what you would expect, because they are the most expensive houses in Canada with the largest outstanding mortgages.”
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