When the term correction is applied to a market, it’s a little bit ambiguous with what exactly that means. Most of will learn at a very young age that to be corrected is to be made aware of your error and what you should understand to be accurate instead. When it comes to markets of any sort, the average person will only claim to know that a correction means prices for whatever it is making up that market come back to where they should be.

That’s not inaccurate, but when it comes to the Canadian Housing Market it’s an overly simplistic view of it. The reason for that is that there are so many variables that factor into the market and it’s not like housing is anywhere near a basic commodity. We don’t need to into that here, but economists and realtors alike will have a more inherent ability to see into the market and understand all of the different contributors that go into determining what would be the natural state of the market.

It really is about as grey an area as can be though, and the one area where people will be inclined to agree or disagree is how detrimental it is when government intervention factors into the state of the market, and distorts what would be seen as a ‘natural’ housing market correction. But at ground level what agents and their clients will see is median home prices coming down, but a lack of supply meeting huge demand creating a scenario where homes nearly always sell for over asking.

This take a great number of would-be buyers out of the game, and for realtors who struggle to drum up first-time homebuyer clients our online real estate lead generation system here at Real Estate Leads is an excellent way to get better results in this regard and build your real estate business – no matter the current state of the market. We’ll now continue to discuss why many are saying the current market correction isn’t anywhere near done.

Continued Decline Into 2024

Canada’s real estate correction hit pause after the central bank promised a pause on BoC interest rate hikes in January of this year. So at that time it looked like home prices had bottomed out after falling more than 17% from a March ‘22 peak. Home prices quickly moved in the opposite direction, and going up by tens of thousands monthly with the release of pent-up demand for housing.

But now some 7 months later, we are seeing that prices in key markets are dropping, as the latest hike rate hikes went against that promise of a pause but – in fairness – were needed to continue the fight against high inflation in Canada. So the overarching belief coming out of this is that Canada’s housing downturn or ‘cool off’ isn’t even as close to being over as many think.

There are some who foresee home prices going down by another 10% or so by the first half of 2024. If that projection materializes then a typical home across Canada will have dropped between 20% and 25% and that lines up with their earlier forecast at the start of the correction.

The bounce back seen in January is unlikely to occur again, and one of the best indicators of that is the way that typically real estate corrections are accompanied by rising unemployment plus declining consumer demand. That wasn’t seen here with first half of the correction, and that’s because Canada had an economy that outperformed expectations. You won’t have increasing unemployment or reduced demand when an economy is doing even fairly well.

Canadian Mortgage Rates to Go Up Too

Canadian mortgage rates have been comparatively quite low for a long time, and much has been made of the ramifications of when it’s cheap to borrow money. That’s another tangent we don’t need to go off on, but what we would say here is that the Bank of Canada is also likely to raise rates again, and what this is expected to do is raise mortgage rates to an expected 6.1% by Q3 for 2023.

Higher costs are already promoting investors moving away from real estate investment. There are estimates that residential investment’s will expand on the 3.9% quarterly decline that was recorded for the first quarter of 2023. The expectations are that through next year construction, renovation, and home resales will slow even more as financing costs rise and investment returns have less luster to them.

Other economists will say that in the event that a correction is mitigated, a larger correction will be required and not too far down the road. This is a tradeoff for short-term satisfaction that will always come at the risk of more economic damage.

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Not every realtor or real estate enthusiast will also be an economist, but there are going to be a few folks who can claim being both. It’s these individuals who will be more likely to know that the Bank of Canada has been aiming to keep inflation to at or around 2%, and they’ll also be the ones who might have strongest inklings as to why that may be unlikely to happen. One thing that even the less economically-savvy people will know is that a comparatively inordinate amount of Canada’s GDP is made up by real estate.

While we’re all either realtors or someone else who has some interest in the industry and profession, we can also fairly say that having so much of a country’s GDP in real estate may be less than ideal, and there are indeed some very knowledgeable economists who’d say it is even a little perverse. But it certainly is what it is, and in the same way and for the same reasons it is not hard to see the role that more cumbersome and expensive mortgages are contributing to the growth of inflation in Canada.

What will happen alongside this every time is that greater numbers of individuals, couples, or families that would be active in the real estate markets stay on the sidelines instead, and that equates to a dearth of new clientele looking to work with a realtor. Again, not much to be done in the big picture but what you can do is take advantage of our online real estate lead generation service here at Real Estate Leads. It will provide the leads on new clientele that you’re looking for, and making it easy for you.

Segueing back to topic, let’s look at the role of mortgages in Canada’s growing inflation problem.

Homebuyer Debt Fuel

We’re all going to be very much aware that The BoC hiked interest rates again a pair of weeks back in response to persistently high inflation, but what’s not so immediately apparent in the relevance of that is the way it is prompting questions about the role of mortgages in the ongoing battle with consumer prices for goods and services that are painfully high and climbing higher. The National CPI is Canada’s consumer price index (CPI), and it was 3.4% in May.

However some insiders have suggested that if mortgages are taken out of the inflation picture then the figure would quite a bit closer to the central bank’s 2% target. Those same individuals will also be saying that you can’t focus all or even the majority of blame for high inflation on mortgages, but at the same time the outsized role of real estate in Canada’s economy makes it fairly impossible for it not to pull on the needle with quite a bit of force.

One constant is that mortgages are especially sensitive to interest rates, and in this way this has the Bank of Canada’s rate-hiking cycle running at cross purposes when attempting to suppress inflation instead of pushing it higher. Interest on Canadian mortgage costs rose 29.9 per cent year-over-year in May – an increase nearly 10 times larger than the overall inflation rate.

More Off Target

Even the BoC governor has agreed that their CPI would be closer to target without mortgages, but he also said these days it may even be a case where too much of the focus is put on mortgages. There’s a lot of number crunching and perspective that goes into that, but it is a fair point to say that if mortgages were taken out of the equation then areas where prices are declining would also have to be taken out of the equation. Let’s take the equally punishing price of fuel. If we take out the ongoing inflation as it relates to gasoline prices it would leave a 4.4% overall inflation rate.

What this does suggest is that in many tangible ways real estate has grown into an industry that’s too big to fail. With that understood , it may be that high mortgage interest increases may be one of the central bank’s goals as it responds to a housing market rebound from earlier this year that came as something of a surprise given the climate.

The rate hike of Wednesday 2 weeks ago was a difficult, but probably necessary move to address inflation, but the need to push back against resilient housing demand and temper prices was absolutely a factor in it too. The ongoing reality is that inadequate supply is the primary cause of Canada’s sky-high housing costs. Occurring alongside of this are construction trends where high interest rates means the businesses that would be involved with home building struggle with tougher economic conditions themselves.

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Explaining the nuts and bolts of why federal interest rate hikes put a chill on real estate sales isn’t really necessary. Most prospective buyers will know when they’re at risk of overextending themselves with financing on a home that they may love just fine, but they know they can’t afford. With the latest 5-basis point rise in the BoC’s standard interest rate there are going to be even more dissuaded would-be buyers who choose to stay on the sideline.

But what isn’t so straightforward is how this contributes to the other end of what’s something of a double whammy. Insufficient inventory is always going to push prices up, as it always equates to even more demand than supply. And having demand infinitely higher than supply has been at the very core of overinflated home prices in Canada for well more than 20 years now. The part that’s not complicated is how fewer homes on the market means the ones there are selling for more than they probably should.

However, with the Canadian Real Estate Association’s announcement this past week that homes sales are likely to decline considerably over the course of the year because of those two factors – supply constraints and the higher cost of borrowing money – it’s a little more challenging to make the connection between the cost part of the equation. Logic might suggest that the number of qualified buyers who can absorb those higher costs would still exist in numbers needed to buy the homes that ARE for sale.

Definitely a topic worthy of digging into, and our online real estate lead generation system is ideal for realtors who are struggling to generate new clientele even at the best of time. But what’s to be made of the here and now, and what can we expect as summer and fall come to a close and we’re back into winter. Which is the season when the fewest number of homes are sold in Canada any year and no matter the economic climate.

Tighter & Tighter

As mentioned, this cut to the forecast for home sales is occurring as tightening home inventory and the Bank of Canada’s recent rate hikes have definitely pulled the housing market off balance. Alright, we’ve gone on long enough here without talking turkey. How much of a decrease is being foreseen, and what can a realtor in Canada expect because of that.

The CREA is currently foreseeing that sales for 2023 will be down 6.8% from 2022, and that’s quite a bit more pronounced drop from the 1.1% dip forecast in April. This past June 2023 was when sales really started to be pinched, with the number of transactions up just 1.5% from May. That increase was smaller than the ones for April and May, according to seasonally adjusted data released Friday.

The more influential of the two factors has definitely been the rate hike though. The BoC raised its benchmark rate for a second straight meeting in July and made it clear that if the financial environment remains the same then successive rate hikes may be coming in the future too. All of this means a major source of uncertainty has returned to the housing market.

Increasing Buyer Trepidation

And buyer trepidation based on home prices is most certainly a part of that too, as housing prices have climbed higher in recent months, although that aspect of it isn’t going to be a surprise to anyone. Housing prices did climb higher over the last few months, and yes the sheer lack of homes for sale is a factor in that the same way the benchmark price for a house in climbing 2% per cent in June from May’s $749,100 average is a major factor too.

The fact that total active listings jumped in most major Canadian cities last month would seem to counter the first part of this argument though. But let’s keep in mind that the number of listed homes has remained historically low for nearly half a decade now. There were just 3.1 months of inventory nationally at the end of June, down more than a full month from the most recent January ’23 peak at and an average that’s still far below the long-term average for the number of homes sold nationwide each month all through the year.

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As was expected, last Wednesday the BoC raised the bank’s interest rates again, and with much the same rationale as before – saying the 25-basis point rise is again necessary to counter inflation and based on unforeseen developments in the National economy. All of which would appear legitimate if you ask the same economists who will tell you this was inevitable based what was underway at the federal level with money-printing adventures at around 3 years ago this time.

Which of course is financed by the same taxpayers who then have to wear the weight of that indiscretion afterwards, and that’s not a very appealing prospect for all sorts of people for all sorts of reasons. Homeowners who are stretched too thin with higher and higher monthly mortgage payments, and if you’re one of those with a variable rate one then the news from last week may well be exactly what you didn’t want to hear if your finances are tight.

We don’t need to detail any further how higher interest rates takes the wind out of home sails sales, as it’s fairly straightforward when astute people make decisions about whether they can really afford to take on that mortgage right now. That’s going to equate to fewer homebuyers reaching out to realtors for help with their first-time home buying process, but our online real estate lead generation system is a way to counter that trend and see to it there’s not much of a dip in the number of new clients you’re drumming up.

Back to topic though, let’s use this week’s entry to get a clearer look at why the belief in the industry is that these rates hikes aren’t going to do much to factor into lower sales prices for homes, at least anytime this summer. And of course with Spring and Summer being the two seasons when homes in North America are most actively bought and sold.

Surprising Rebound

A recent RBC economics report shares the belief that these rate hikes from the Bank of Canada won’t promote much of a decline in home prices, if any. Yes, the 25 basis-point rise in the Bank of Canada’s policy rate should cool demand by a small amount over a limited period of time. The expectation is for conditions to ease some more over the foreseeable future and bringing markets closer to balance.

That evaluation is made based on the acknowledgment that the housing market has rebounded more rapidly than most economists foresaw it coming back. The BoC’s director had conveyed to Canadians in that the central bank was pausing its hiking campaign in January, and there are some industry insiders who believe that the strong market rebound that coincided with that in late January / early February was a fairly direct outgrowth of that.

That lines up with the increasingly broad rise in home sales over April and May created numbers that were a lot closer to pre-pandemic levels for that time of the year, and the belief is that a lot of that enthusiasm was built on the belief that interest rates were unlikely to be going up again.

And so while rates DID go up and again and real estate purchases are taking a noticeable hit because of it, the fact is that home resales are now just 6% below what was considered to be a ‘vibrant’ level in February of 2020.

Market Will Bear

Much of this can be attributed to the age-old maxim that prices are set by what the market will bear, and those who can afford those prices are the ones who set the market. Whether that’s right or wrong that’s the way it works and although the pool is shallower there are still people who can afford to buy houses and take on mortgages despite the current state of the market and interest rates playing their role.

And so here we are with prices remaining below year-ago levels, but the belief is that is a not-for-long reality for Western Canada, parts of the Atlantic Provinces, and Quebec. Prices gains are foreseen for these reasons coming up fairly soon, and those stronger prices could be increasingly convincing for sellers to list their homes and promote more summer sales activity.

That may occur to an extent, and while more inventory may bring down prices to a point the more likely scenario is that this now 5% range means that a housing market revival isn’t going to pick up much traction in this current fiscal environment.

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We’re just 2 days away from decision day at the Bank of Canada, and of course the big decision that’s to be made on Wednesday of this week is whether or not another hike of the country’s interest rate is in order. There are many insiders who have already stated it is very likely as good as done, and the reasoning being the same as the last increase to the federal interest rate – the inflation that is hurting the economy isn’t being suppressed to the extent we need it to be.

Much has been made of how interest rate hikes have put homeowners in precarious situations, and most specifically with those who have overleveraged themselves to buy a home. The FOMO – fear of missing out – phenomenon has been a very real one with home ownership impetuses for many young people in Canada, and it has been understandable. But unfortunately it is these people who are decidedly ‘house poor’ who stand to be most negatively affected if interest rates go up again.

In the bigger picture this will also always mean that fewer qualified homebuyers exist, and there also may even be qualified ones who are choosing to err on the side of caution when the cost of borrowing money is becoming much, much more expensive these days. That detracts from the ability of a realtor to generate themselves new home buyer clientele, and it is well known that the majority of homeowners will know personally of a realtor they’re likely to work with.

Our online real estate lead generations system here at Real Estate Leads can be a very good way for new realtors to still generate clientele of both types, and it comes highly recommended. But let’s dig deeper into what another raising of the interest rate could mean for new homeowners.

More Debt Servicing

Another increase will mean some homeowners will be unable to finance their mortgage. This is because incomes have not been rising in pace and so increasing amounts of these owners disposable income will have to go towards paying interest on our debt, while making much less progress on paying down the actual mortgage debt itself.

And of course those raises have happened eight times in less than a year, and another one on Wednesday would be the third increase for 2023. If it is the 25 basis points that economists are predicting then the overnight rate would be moving up to 5% and the prime rate to 7.2% .

This would make for the highest rates in approximately 30 years, and they’re going to take quite a bite out of the finances of lot less-stable homeowners in Canada. Those with a variable-rate mortgage will be taking it on the chin the worst, and estimates are that a homeowner who has put 10% down on a house that costs about $729,000 with a 5-year variable rate of 5.80 per cent over 25 years will pay $100 more per month in mortgage payments.

That may not seem like a lot, but for some households it will be problematic and let’s keep in mind these rate hikes seem to be coming fairly regularly now and what’s to suggest that’s not going to continue? Then there are those with a fixed-rate mortgage who will see an increase when their term expires. The ramification that will apply to all is that the rate hikes will have a little bit longer lag in terms of that monetary policy transmission to households.

New Lender Safeguard

But the consensus for current homeowners with a mortgage up for renewal within the next year is that they should seek out rates with a new lender. By doing so owners if rates are raised again they can try breaking their existing mortgage and switching to that new lender before your rate hold expires to lock in the lower rate.

As mentioned, the needs for these rate hikes are explained with the way excess demand in the economy looks to be more persistent than anticipated. Hiking interest rates is done with the aim to cool demand from the markets. This can be derived from both households and businesses, and the accompanying aim will be to balance it with production capacity.

This has the potential to be a worrying time for some homeowners yet again, but it’s an example of how the nature of lending means that people assume risks with borrowing money and that reigning in inflation is something that must be done even if it puts some lenders in increasing jeopardy.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated leads that are provided to give you the opportunity to be first-in-touch with prospective clients who are looking to sell or buy a home. And as you would hope they will looking to make that sale or purchase in the area of the country where you are working as a real estate agent. Realtors who are determined to increase their business levels will quickly see the value in having gotten onboard with this.

If there’s a subject that has more of a buzz to it in the world of technology than AI does, we’d like to hear of it. Everyone will know of the incredible disruption that’s underway because of Chat GPT and the like, and it’s already starting to reach into many different professional and industrial pathways and changing how people work and do business. It’s also helping people make better and more informed decisions with regard to where they put their money, and as we all know buying a home is one of the most pivotal decisions people make in their lives.

And so it is that Artificial Intelligence is being utilized by prospective homebuyers in Canada, and it is one application for it that like many others is likely set to become more commonplace in the future. There is already a story here in BC about a realtor who has built a platform to incorporate AI into his real estate services, and you can be sure that the big brokerages in Canada are making efforts to stay on the curve with this too. There’s a ‘shake up’ underway, and the only thing that remains to be seen is just how much shaking is going to be done.

One thing a realtor should always do in the interest of serving and retaining clients is to be as entirely in the know as possible when it comes to the industry. So it makes sense that an agent should be in the know about these disruptive technologies can be utilized to help clients who are looking to buy or sell a home. A knowledgeable realtor is a busy realtor, and every one of them will want to have fully satisfied clients that will return to them in the future if further sales / purchases are a possibility. Our online real estate lead generation system here at Real Estate Leads is an excellent choice for new realtors.

This weeks’ entry is going to look at AI in real estate, so let’s get to it.

Smarter Listings / Smarter Staging

Real estate companies are now using generative AI to create descriptions for listings to meet their clients’ needs and using it to stage images of an empty home. And AI is proving that it can definitely help those who are searching for their dream home. Two of the newer tools that have come out recently for doing just this are TopHouse and HomeSearchAI. They allow homebuyers to search listings with the exact specifications they might want, using normal language to sort the listings instead of using filters as they have with conventional resources to this point.

It is quite impressive with them how you can just type exactly what you want and it’ll understand what you need, and give you results based on your unique needs. You can have a product that understands a person’s unique need and removes a lot of the until-now inherent complexity in weighing potential homes against each other in the process of making a purchasing decisions.

It’s wonderfully simple – you just type in what you need, and it will give you results. Using AI allows the platforms to incorporate data previously inaccessible in a single platform for home searches. Examples could be the direction the home is facing, or simply typing in 2BR to have two-bedroom units evaluated exclusively.

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Less Restrictive Searches

Until now individuals were restricted by the maps-and-filter page user experience when searching for prospective homes themselves. Specifying the need for a four bedroom, detached with three-car garage or a 2-bedroom condo open concept facing north wasn’t realistic with the technology available to consumers until now, but with AI these types of direct spoken or text-entered search terms are answered with much more intuitive responses based on the ability of the artificial intelligence to better understand the requests.

In the future we will likely see these platforms adding more AI features like traffic data or school rankings so homebuyers can look for homes near quality schools, or within a reasonable commute from their workplace. There are all sorts of other possibilities too, and ideally we’ll see AI-driven real estate buyer / seller platforms featuring AI-enhanced home searching that is better tailored to those who are reasonably far down their search and know exactly the type of property they want.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that will always be provided to you exclusively. You will be the only realtor to have your leads, and they will be for people who have indicated their willingness to buy or sell a home in the near future and do so in the area of the country where you are working as a real estate agent. These are YOUR leads, and what you have is that exclusive opportunity to be the first realtor to contact them and present yourself as the professional they need for best results with buying or selling a home.

Last week’s interest rate hike as put forward by the Bank of Canada was the ninth hike and came following what was promised as a ‘pause’, and meaning that no further rate hikes would be put in place for the near foreseeable future. What they’ve provided as a rationale for making that move is a stronger economy than expected as represented by Canada’s GDP. And despite the fact there’s not much healthiness to it, we as a country have a shockingly high amount of our GDP being produced by the purchase and sale of real estate.

That’s the product of loose monetary policy and an ‘anything will do’ approach to economic underpinnings in a country that has made a sharp and drastic departure from the socioeconomic track it had been on for well over a century to date. That’s an entirely different and much larger discussion for a different time though, and instead it’s going to be our focus to look at how a reinvigorated housing market seen over recent months here in Canada has done much to fuel the decision to raise rates.

That uptick in activity certainly is welcome for many different people with a host of different interests in seeing the real estate market rebounding as it has. Realtors will be among them, but agents who still struggle to be finding and retaining new clients will like how our online real estate lead generation system here at Real Estate Leads is the smart choice for giving you the advantage you need there.

Forced by Household Sector Demand

Digging deeper, the resale market’s role in the most recent inflation measure is even more pronounced than some might have thought it to be, and Statistics Canada’s Consumer Price Index (CPI) edging up 4.4% in April is the first of a few indicators of that. Seeing an economy continuing to features excess demand exceeding supply to an ever-greater extent with not the expected rebalancing there is front and center with why the interest rate hike was deemed necessary

Growth in the second quarter with regards to home sales was viewed as likely to be stronger than forecast in the April MPR, and even though housing resale prices had grown over the course of three months it wasn’t lining up with the expectation for inflation to decrease to near 3% over the summer. It’s clear by this point that is not going to happen, and all of these rate hikes have been undertaken with the primary aim for them being to reel in inflation.

And that checks out here too, as the trends in the core inflation data have created doubts about the strength and durability of ongoing disinflation. Those are coming at the same time as concerns that inflation could become stuck at a level materially above the 2% target. The last part of that is darn near a direct quote from the BoC, and there are others that relate to additional variables contributing to the need to rise rates, but we’ll skip those for now.

Robust Demand

Nothing is more integral to the perspective than the way consumer demand has proved to be more robust than expected. As to why the economy has shown itself to be so resilient, we can look to a number of specific points; a delay in the full effects of past monetary policy tightening, pent-up demand for services and improvements in supply chains for goods, excess , and labour markets that have stayed much tighter than economists had expected. Emphatic population growth and seasonal adjustment factors have their own roles to play too.

Another outlier from what was foreseen was an accompanying jump in median household spending, and this always has a connection to increased consumer confidence across the board with different markets. The housing market is never an exception to that, and by the middle of this current month (June ’23) there’s been enough evidence to convince the BoC that their policy needed to be more restrictive to rebalance supply and demand in the economy and reorient themselves to reach the 2% inflation target.

The rate hikes do mean that people who can’t afford to pay cash for a home WILL have greater difficulty affording their mortgage, and anyone that applies to won’t like to hear that they may be upcoming interest rate hikes again before the year is done. Another decision will be made on the 12^th of next month following a further review.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to one realtor exclusively – you. They are your leads alone and they’ll be for prospective clients who have shown themselves to be ready to make a move in the real estate market of any city or town where you work as a real estate agent. This is an excellent way to get more out of your client prospecting efforts, and you’re encouraged to view our testimonials to see how that reflect the belief of most realtors who have already gotten on board here.

This was the first raise since January and experts are cautioning that it won’t be the last.

The next interest rate decision is slated for July 12, 2023. A monetary policy report is also scheduled for release at that time.

Only 2 days remaining in Spring before we have the longest day of the year and the official start of summer on June 21. So if we’re to look back at Spring here, we can see that one of the more forefront stories in Canadian real estate circles for Spring 2023 was the ‘rebound’ seen in the housing market. We saw the first national year-over-year sales increase in almost two years, and looking at that from ground level it was a very welcome change for homeowners who had shelved plans to put their homes on the market before the chill came.

It’s been a promising turn of events, if not a natural resumption of the standard realities of market forces doing what they do. That’s preferable for homeowners, but at the same time there is still a pressing need to find a balance and there are still too many people who are shut out from owning a home despite having a good income and credit history. That itself may be a discussion for another time, but it’s important to say that those who take exception to home prices have their grievance with federal and municipal governments rather than homeowners themselves.

Realtors are among those who’ll be happy to see this rebound, but one thing it will not alter is the competitive nature of the business. Realtors who are newer to it may be at a disadvantage no matter how strenuously they try to generate new clientele, but for these agents our online real estate lead generation system here at Real Estate Leads is an excellent way to get better results from those efforts.

Let’s now turn to looking at the housing market rebound in greater detail, and specifically with how it may run out of steam to at least some extent.

Better than Incremental Gains

The housing market gains seen in May that came after an 11.3% spike in April did narrow the gap between current sales rates and pre-pandemic levels, said RBC assistant chief economist Robert Hogue. Home sales are now just 6% down from where they were in February 2020, the approximate time when the pandemic was about to begin and turmoil was to reach into every aspect of Canada’s economy.

But this current recovery rate is stronger than expected, and gains were seen across the entire country. Every province had sales numbers up considerably, and the largest increases were in British Columbia. There sales increased 23%, and Ontario was a close second with 22%. As for individual cities, not much surprise in seeing that in Vancouver and Toronto home sales increased 35% and 32% respectively.

For the second consecutive month median home prices were up across the country too. The national composite MLS Home Price Index fell 15% from its February 2022 peak, has now gained 4.1% over just the last two months. May’s 2.1% rise lines up with the average monthly rate of increase seen during the market boom.

By Cities

Here are cities that enjoyed sharp increases in prices. Cambridge, Ontario had prices go up 4.9% month over month, and the number for Northumberland Hills was 4.7%. For Sudbury it was 4.5% and 3.6% for Kitchener-Waterloo. Getting right into the Big Smoke, Greater Toronto was up 3.1%. Heading out west to BC the gains were more modest, with Fraser Valley (Abbotsford / Chilliwack) leading the way with a 2.4% rise. Other notables in Canada were Winnipeg with 0.9% and Halifax with 0.8%.

What we can say with certainty is that the sudden turnaround is by and large attributable to interest rates. Let’s remember that it was the central bank’s aggressive hiking campaign over last year that initiated the housing market’s downward spiral, and the signal in March that the worst of rate hikes might be over really reinvigorated demand and pulled prospective buyers and sellers out of their slumber.

That enthusiasm chilled in a big way when earlier this month the BoC changed their mind (not without good logic for doing so to be fair) and raised rates by another 25 basis points to 4.75%. We can be nearly certain that’s going to take a LOT of steam out of the recovery and pull back on the momentum that’s been gained over recent months.

Dampening Market Optimism Too

Industry experts are indeed saying that the Bank’s latest 25 basis-point rate hike will definitely dampen market psychology. That hike did take commercial banks’ prime rate to 6.95%, a 22-year high but what is noteworthy with regards to this discussion is that bond yield rates are climbing at the same time. What this does is push up shorter-term fixed mortgage rates, and up until now they’ve been a popular – and viable – alternative to variable rates.

The Royal Bank also feels the current strength in the market will not likely be sustained for the rest of the year, and they chime in similarly with saying that the 25 bp rate hike should cool demand by at least a few percentage points overall and for individual housing markets too.

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We’re going to assume that a good many of the realtors that visit our site here and read our blog will be able to remember a time when clients were able to purchase detached homes for less than $200, 000 dollars. And that it was even possible in ‘desirable’ locations in Canada provided you were able to temper your expectations about they type of home you’d be receiving for that price.

Many of them would have been considered starter homes, and as such the types of people buying these homes would be entirely amenable to the fact that the home wasn’t perfect. That was the reality for plenty of our parents with their first home they bought in Canada for less than a quarter of a million dollars.

Was it a time when the real estate business was any less competitive? Likely not, although some would make the fair point that there likely weren’t as many realtors back then. And primarily for the fact that working in real estate wasn’t as potentially lucrative to the same extent. But whether that’s the case or not, realtors who are finding it difficult to drum up new clientele the way they’d like then our online real estate lead generation system here at Real Estate Leads is a solid choice.

Now with the standard recommendation made, let’s proceed with this blog entry and look at how these long-standing affordable homes in Canada are close to becoming non existent.

35 of 50

We agree that it is a sign of Canada’s deepening affordability crises when we come to understand that homes under $200,000 are becoming near unheard of all across the country. A study by real estate marketplace facilitator Point2 Homes has put out a study that has laid out the facts regarding the near-total lack of homes for sale anywhere in the country that cost $200,000 or less.

Their study found that you’ll be unable to find homes under $200,000 in 35 of Canada’s 50 most expensive large cities. All of these cities are located in either British Columbia or Ontario and the criteria established was done by taking Canada’s 100 largest cities and then ranking them by highest median home price.

The other 15 cities on the list may have returned a few homes on the market below this price point, but with the exception of two of them all came back with zero to 1% of their respective markets featuring homes with a sub-$200k starting price point, and then of course let’s all keep in mind that any home that is even remotely affordably is almost certainly going to be the subject of a bidding war and sell for over asking price.

We can add to this further and point out from the report as well that 24 of the top 50 cities have benchmark home prices upwards of $1 million.

Lower than the Previous Low

It might make sense to think that because last 12 of the 50 largest, most expensive cities had homes for sale under $200,000 and 30 had benchmark prices of over $1 million that what we have for 2023 is an improvement. But that’s not the case; a closer look shows that the actual share of these homes in the market is equally as bleak when put in perspective. The reality is that homes below $200,000 once again represent less than 1% of all the homes available for sale in the top 50 cities.

Just two spots in Ontario – Waterloo and Kawartha Lakes – had any measurable shares of homes under $200,000. Waterloo’s number was 3.13% and it as 2.62% for Kawartha Lakes. Homebuyers priced out with this now have the best chance of finding a home in Atlantic Canada or the Prairies if they need to be below $200K as a price point. Cape Breton, N.S., and Saint John, N.B., had the highest share of homes under $200,000 at 44.5% and 36.6%.

They may also be wise to look to the Prairies, with all of Regina, Winnipeg and Edmonton having between 18.6% and 28.9% of listings under that point.

BC is the worst for housing unaffordability if we evaluate it with this criteria. Of the province’s 18 most expensive cities there are absolutely zero homes under $200K on the market. And only two out of the 2,300 listings in Surrey are currently listed for less than $200,000 and only one in Abbotsford and Richmond.

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Toronto is sometimes referred to as Hogtown, but it is the other nickname ‘Big Smoke’ that reflects the way that Toronto is the equivalent of what New York City is to the United States. It’s the most populated city and likely will be for the foreseeable future. Bay Street will always be the primary hub for Canadian business, and there’s all sorts of other industries where people work and make their living and that necessitates them needing to live in the Greater Toronto area.

But that’s increasingly difficult to do for a lot of people, and as you might expect it is in Toronto and Vancouver where home prices have been overinflated for many years now. Now that May is done the industry is cleared to review and evaluate the Spring real estate market in Canada, and with the thaw seemingly in full swing and any degree of what many would call a market correction looking to be over it is also not surprising that prices have resumed climbing in Toronto.

Buyer enthusiasm will always be the primary impetus to seeing that happen, but in Toronto more than any other place in the country the way that there is so much more demand than supply is fueling what we’ve just seen as a market rally that will be good news for homeowners ready to put homes on the market.

There are always going to be challenges related to working as a real estate agent in major metro regions, and that’s true for both Canada and the USA. It’s a competitive business, and our online real estate lead generation system here at Real Estate Leads is an excellent resource for realtors working in Toronto or any other big-city area who are struggling to drum up new clientele to the extent they’d like to be.

Let’s stay on track and look at how Toronto’s housing crunch is exacerbated by supply and demand inequalities more than elsewhere in the country.

25% Sales Increase From Spring ‘22

Positive indicators from the Toronto Regional Real Estate Board’s (TRREB) May data are very reflective of how demand for housing in Toronto is higher as expected in comparison to other cities and regions of the country. The average homes price has increased 3.7% since last month, but that still comes in at 1.2% lower than what was seen for this time last year.

But home sales in Toronto have increased 20% since last month and have now gone up nearly 25% since last year. New listings in the city increased 36% from April 2023, and May had 15,194 listings registered with the Toronto MLS. Further, the market has remained tight with listing supply down 18.7% from last year and what this continues to do is make the Toronto housing market one that is much more conducive to homeowner’s interests rather those of buyers.

And so it is that it will continue to be a seller’s market in much the same way it is for Vancouver and to a lesser extent Montreal. For Toronto it is common for listings to sell within 14 days, and that is some 20% sooner than last month but remaining at 16.7% slower in comparison to the even more overheated spring market of 2022.

Source Supply

The month-over-month increase in new listings comes as a welcome relief to the tight supply and demand imbalance but is still down 19% compared to May of last year. kept sellers in a price-setting position for most of the year to date. Grasping these and other supply logistics facts could offer insight into how the remainder of the year will go for Canadian real estate.

With Toronto and other major markets, the reality seems to be that if move-up buyers are the ones primarily driving supply shortcomings then the market could be providing a forecast of recovery. Oppositely though, if the market is being driven by sellers in any measure of financial distress and needing to offload investment assets then it may suggests that the market is in line to experience some headwinds against a recession this year.

Looking past Toronto to put the relevance of all this in a bigger-picture perspective, nationwide supply did pick up toward the end of May and so continued opportunistic selling could put an end to the spring market being a seller’s market, although we need to keep in mind that average price usually go down from May until August every year.

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