As we move past the midway mark for 2021, it would appear that the temporary slowdown or ‘blip’ in the market indicated for April continued into May. Despite this industry experts still foresee 2021 setting a new record the number of home sale transactions, but it’s interesting to note how the slight freeze seen for April has stretched into May now that June has ended. It’s important to understand that peaks and valleys are often the norm in any industry, particularly following volatile times (no explanation needed surely) and so this isn’t exceptional really.
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So let’s have a look at what the CREA determined was the case for May 2021 in the Canadian real estate market.
Slight Fall Back
Home sales across the country are beginning to fall back from highs seen earlier in the year, although as mentioned the Canadian Real Estate Association still foresees the number of transactions during 2021 setting a new record. The 56, 616 sales seen in May were a 7.4& drop from April’s 60k+ with month-over-month sales also declining in nearly 80% of all markets.
The transaction volume for May was a significant dip compared with what was seen this time last year when COVID was in full swing across the country, but the association expects sales to inch up toward more standard levels as we enter the back half of 2021 and going into 2022.
The consensus seems to be that 2021 transactions will increase 23.8% from last year, and that is predicted to work out to somewhere in the vicinity of 682,000 homes sales for this year. That would be a record, but then the same experts are foreseeing somewhere around a 13% decline to around 594,000 homes being sold for 2022.
Higher Prices, Insufficient Supply
This slowing can probably be attributed to higher prices, not enough supply and widespread buyer hesitancy as well as more and more people being affected by new mortgage stress test regulations put in place by the Feds.
The CREA believes these sales declines are going to be largest in B.C. and Ontario, the two spots where pre-pandemic bidding wars and soaring prices were amplified massively during the pandemic. The term that’s being used is ‘Simpson’s paradox’, which apparently means a situationwhere the average price in every province will see a larger year-over-year increase than the national average as sales start to shift away from provincial markets that are the most expensive.
Other predictions:
- The average home price will rise by 19+% on an annual basis to reach $677,775 this year and then to $681,500 for 2022
- Highest average home prices will be in B.C., with CREA forecasting gains going to $883,781 in 2021 and 896,304 for 2022
- The most affordable housing will be homes in Newfoundland and Labrador, with ones selling for an average nearly $273,00 in 2021 and nearly $280K for 2022
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