Real Estate Correction Foreseen to Continue into 2023

Published December 12, 2022 by Real Estate Leads

Any knowledgeable real estate professional would have told you at this time last year that the overheated real estate market in Canada was going to cool off eventually, and that it really was an inevitability. That of course did happen following the first third of the year, and the ‘correction’ that is a more clinical term for the normalizing of median home prices has been ongoing for more than the past 6 months as we get near the end of 2022 here.

As we’ve stated many times here, this correction is definitely a net positive and for all sorts of reasons, overall housing affordability for Canadians being at the forefront there. We’ll say that with a caveat of sorts in also saying that the market will swing back the other way again and another thing you can never look past is the way demand will always way outstrip supply in desirable major metro areas of the country. But again, overall the market correction is doing good things for would-be new homeowners, even if this is only temporary.

This is something that factors into the day-to-day for all realtors too, as when there is a market correction there will usually be more condos going on the market, while fewer detached homes are there. There are exceptions, but most of the time this is due to investor-bought condos going onto the market because of price drops and then detached home owners delaying selling their home while prices are down. For realtors this can mean the ebb of an ebb and flow, but our online real estate lead generation system here at Real Estate Leads can help those who are struggling with generating new clients right now.

Let’s stay on track and look at how real estate industry experts and economists are foreseeing the current real estate correction to be continuing well into next year.

Sales Activity Below Pre-Pandemic Levels

RBC, Canada’s largest bank, warned that the market is still firmly in correction mode and there are only a few locales that are an exception to that. There are some signs of firming, but RBC economist see real estate markets continuing to decline into 2023. Sales activity is still below pre-pandemic levels, and prices are still going down in regions with outsized gains. The general consensus is that Canada’s housing markets are still very much in correction mode and will continue to be there for the foreseeable future.

However, the correction has been mixed and markets with outsized gains have seen activity come to a near complete stop. As you’d expect that includes Vancouver and Toronto, but also the Fraser Valley, Hamilton, Ottawa, and Montreal. the prairies are a notable exception though. Calgary and Edmonton are both experiencing increased activity and the type that comes in above pre-pandemic levels. Stronger provincial economies and rising immigration are seen as what’s behind the the boosted demand for real estate in both cities.

By and Large Balanced

The sales to new listings ratio (SNLR) is a primary method for determining if markets are ‘hot’ or cooler. Most of the major markets in Canada are currently coming in at ‘balanced’ but we should keep in mind balanced is often only a temporary predecessor to them quickly becoming buyer’s or seller’s markets. Few people sell in November and December too, so SNLRs usually rise. Any perceived stability of the market might not be accurate if based on this view.

It is true thought that Canada’s markets are now having balanced SNLRs and Vancouver, Edmonton, and Montreal were all in the middle of balanced territory. The Fraser Valley is a buyer’s market, and the accelerated price erosion here is something of a surprise given how Abbotsford and to a lesser extent Chilliwack have always had maintained demand due to being the release valves for those priced out of the market in Greater Vancouver, at least to some extent.

Toronto is close to being balanced, and it is as much of a buyer’s market as it’s ever been over the course of the last 20 years, although that is relative of course and the same will always be true for major metro cities in Canada. Calgary is an exception to this trend, where the SNLR was a very hot 86% in November and is only slightly lower if at all this month. The oil boom, relatively affordable prices, and an inflow of young adults looking for work and affordable housing has resulted in majorly increased demand.


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