If you’ve been sitting on the sidelines waiting for the right moment to enter the housing market, you likely know it’s booming once again. Multiple offers, bidding contests and bids above asking are not uncommon and reflect the determination of some homebuyers this spring.
You may be asking yourself, ‘Is now the time?’
Let’s put things in perspective. The Canadian Real Estate Association (CREA) reports national home sales “surged” 11.3 per cent month-over-month in April. The number of newly-listed properties edged up 1.6 per cent month-over-month but remain at a 20-year low.
MARKET HEATING BACK UP
“Over the last few months, there have been signs that housing markets were going to heat back up this year, so it wasn’t a surprise to see things take off after the Easter weekend, which often serves as the opener to the spring market,” CREA Chair Larry Cerqua tells us.
His advice? “If you’re looking for information and guidance about how to buy or sell a property in this rapidly changing market, contact a realtor in your area.”
The national average house price climbed to $723,900 in April, according to CREA. That’s down 3.9 per cent from April 2022, when the average house netted $745,444. Average prices jumped in April by five to six per cent across the Greater Toronto Area and beyond, to Kingston in the east and Simcoe to the north.
Now let’s look at the Bank of Canada’s recent decision to raise its key overnight lending by 25 basis points – a quarter of a percentage point – to 4.75 per cent. Its reasoning: consumer spending, core inflation and a tight labour market haven’t been cooling in line with its forecast when it conditionally paused rate hikes earlier this year.
Inflation has fallen from 8.1 per cent in June 2022 to 4.4 per cent in April but is still higher than the Bank’s target of two per cent. Some mortgage experts predict a further 25 basis point rate hike is on the table at the next announcement in July, which could push more sideline buyers into the market now.
PRICE DECLINES WILL CEASE
“Looking ahead, the first week of May did see a bit of a burst of new supply, suggesting some of those April buyers were existing owners now looking to sell their current homes,” Cathcart notes. “That could make for the kind of virtuous circle that might ultimately get more first-time buyers into the ownership space this year.”
In its most recent Housing Market Outlook (HMO), Canada Mortgage and Housing Corporation (CMHC) predicts the recent declines in home prices will cease in the middle of the year, but believes the average annual price will end below the 2022 level. Prices will continue to increase through the end of 2025, it warns.
The federal government’s plan to welcome 1.5 million immigrants by 2027, meanwhile, will put additional pressure on housing markets in the next few years. According to the CMHC forecast, new housing starts will decline and remain well below 2021 and 2022 levels thanks to higher construction and borrowing costs for housing developers before seeing some recovery in 2024 and 2025. Still, housing starts for all areas in Canada increased 22 per cent (261,559 units) in April compared to March (213,780 units), CMHC notes.
After waiting months on the sidelines, it’s understandable that prospective homebuyers are eager to get into the market. And many real estate experts agree remaining on the sidelines could prove costly.
WAITING COULD PROVE COSTLY
Here’s why: Today’s prices are about four per cent lower than they were at this time last year. The housing market recovery has happened quickly so a house purchased today will very likely hold its value in the short term and appreciate over the long term.
And remember CMHC’s prediction that recent declines in home prices will cease in the middle of 2023 so by the time those mortgage rates drop, house prices will have risen.
CMHC offers helpful tools that can help you make an informed decision, including homebuying calculators (www.cmhc-schl.gc.ca/en/consumers/home-buying/calculators/mortgage-calculator) and an affordability calculator (www.cmhc-schl.gc.ca/en/consumers/home-buying/calculators/affordability-calculator).
CONTACT THE KING HOME TEAM
Let’s not forget CREA’s advice that if you’re looking for information and guidance about how to buy or sell a property in this rapidly changing market, contact a realtor in your area.
The King Home Team: Royal Heritage Realty will take the time to help you understand the market so you can weigh your options carefully. We have considerable experience navigating seller’s markets and are committed to working ethically on your behalf, from finding the right home for your needs, to negotiating a purchase price and contract terms, and guiding you through complex contracts.
Contact us today and let us help you realize your homeownership dreams!