The last 2 years have been especially noteworthy in Canadian Real Estate, and for no other reason more prominently than the fact we’ve seen the market reach a new record high for median home prices and then seen it come rocketing back down to lower levels that are quite drastic in comparison here in the last 2/3rds of 2022. Some people will be pleased to see average home values come down, and there is some merit to that with regards to housing affordability overall. But as we’ve stated so many times, when you consider how much of Canada’s GDP is in real estate it’s really not a good thing in the big picture at all.
The drops in median home values have been most pronounced in what we’d call medium markets in Canada, and this means that large ones like Vancouver, Toronto, Montreal, and Halifax have stayed fairly insulated from the declines. But no matter where homeowners live in Canada, any drop in home values is never going to be seen favourably and especially if that homeowner has plans to sell their home anytime in the near foreseeable future.
Let’s keep in mind as well that there is a balance to this all, and those first-time homebuyers that are looking for an affordable first home will have less to choose from and more competition for available housing supply in their price ranges when there are fewer homes on the market because of these median value drops. Remember that owners who can put off having their home listed are quite likely to do that most of the time.
Realtors are affected by that too of course, and for any feeling the decline in their own client base our online real estate lead generation system is ideal for realtors who need an advantage when it comes generating new clients. It’s proven for providing leads for prospective new clients and giving those realtors the opportunity to be first-in-touch with them.
But back to our topic this week, there are signs that the downturn in Canadian real estate is running out of steam and that home values will start to normalize again to some extent. Here’s why.
End of Cyclical Downturn
The belief is that Canada’s housing market is now entering the latter stages of its cyclical downturn. A slowed pace of decline being seen as there was a smallish monthly increase in home resales nationwide in October, and this marked a notable shift from the steep decline in activity that took place over the 2022 spring and summer seasons.
We’re seeing that property values are coming down at this stage, even though October’s drop was the smallest since May. While an inflection point is probably still a ways away, industry insiders believe the price correction phenomena is likely behind us. The adjoining belief is that rising interest rates and the loss of affordability will mean a fairly quiet market into early next year with prices bottoming around the spring.
Good resale increases are being seen too. Home resales went up 1.3% m/m across Canada in October (424,600 units) and this would suggest market activity is nearing a bottom after going down 36% over the 7 months before October.
Local markets that recorded a monthly increase:
- Victoria (+19.7%)
- Vancouver (+6.5%)
- Edmonton (+3.3%)
- Saskatoon (+6.3%)
- Winnipeg (+2.2%)
- Hamilton (+1.7%)
- Saint John (+2.7%)
- Halifax (+9.2%)
Toronto and Calgary sales were essentially flat for the month (up 0.2% for both), while Ottawa (-2.9%), Montreal (-2.4%) and Quebec City (-1.6%) had declines. Plus, the number of existing homes changing hands remained below the levels from exactly one year ago in virtually every market.
Decline Streak Slowing
The fall in home prices hasn’t entirely stopped though. The aggregate MLS Home Price Index for Canada slipped in October again, and for the 8th straight month. It went down below its year-ago level (-0.8%) for the first time in three years and it’s now down 10% since the February peak. It’s possible the market is in a late-stage downturn, but nothing suggests the market is going to heat up again the same way it did early pandemic either. High and rising interest rates will continue to challenge buyers and this will result in suppressed activity even if it stabilizes near current levels. The consensus among real estate insiders seems to be that benchmark prices will keep trending lower until spring.
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