Canada’s housing market is cooling off. What does this mean for autumn? – National

After Canada’s economy was boosted by the COVID-19 pandemic, the housing market is showing signs of weakness as house prices fall and bidding wars ease.

It’s welcome news for potential buyers hoping for a better price. But as the busy fall season approaches, brokers and economists are at odds over how long the price drop will last and how deep it will go.

“The fall will be interesting because more buyers are likely to enter the market, and it doesn’t take a lot more buyers to give prices a little more stability,” said John Pasalis, president of Realosophy Realty Inc. in Toronto.

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“Just a small spike in demand could make the difference between houses selling in three weeks, four weeks, or selling in two weeks, or selling a lot faster.”

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The average home price is still above pre-pandemic levels, but rising mortgage rates and inflationary pressures are weighing on the market.

When the pandemic lockdowns began in March 2020, the Toronto Regional Real Estate Board said the average home price in the area — one of Canada’s hottest — was $902,680. Last month it was $1,074,754, up 1 percent from July 2021 but down 6 percent from June 2022.

Click to Play Video: 'Despite rising interest rates, some homebuyers are being lured back into the market by falling house prices'

Despite rising interest rates, some homebuyers are being lured back into the market by falling house prices

Despite rising interest rates, some homebuyers are being lured back into the market by falling house prices – 08/19/2022

The latest data from the Canadian Real Estate Association (CREA) showed prices hit $629,971 in July, down five percent from $662,924 last July. Seasonally adjusted, it was $650,760, down 3 percent from June. When the pandemic lockdowns began in March 2020, the average national price was $543,920.

The association forecasts that the national median home price will increase 10.8 percent annually to $762,386 through the end of 2022 and reach $786,252 in 2023.

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However, some economists expect the price to drop even further.

In June, a trio of Desjardins economists said they expected the average national house price to fall 15 percent between its February high of $817,253 and the end of 2023, but because “we’re almost there,” they adjusted their forecast August to predict a drop of between 20 and 25 percent.

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“House prices continue to fall and must continue to fall before they find a bottom,” said Randall Bartlett, Helene Begin and Marc Desormeaux in a report published July 11.

“Nevertheless, we still believe that home prices nationwide and in all 10 provinces will be above pre-pandemic levels in 2023.”

In anticipation of a price drop, agents have been eyeing potential buyers sitting on the sidelines in recent months, while sellers are content that their homes won’t fetch as much money as they did at the start of the year.

Lori Fralic calls it a “stalemate.”

“We’re seeing lowball offers,” Keller Williams Realty’s Vancouver agent told VanCentral.

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“There are a lot of bargain hunters out there bidding, but when they don’t need to sell, a lot of sellers say, ‘No, sorry, I won’t take it.’

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Your Money: Canada Housing Market Update

Your Money: Canada Real Estate Market Update – August 11, 2022

It’s a change from the rapid pace of sales and frenetic bidding wars seen earlier this year and late last year.

Much of the shift can be attributed to mortgage rates, which reflect fluctuations in interest rates and can affect purchasing power.

The Bank of Canada raised interest rates by one percentage point to 2.5 percent in July, the largest hike the country has seen in 24 years.

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Economists expect the surge to continue, and Fralic said they are already encouraging those who don’t need to buy now to wait.

She has seen a price drop in BC but said it hasn’t fallen as much as many were expecting.

“If people think that (prices) will go down, I don’t think that’s right,” she said.

“If you look at Metro Vancouver’s 10-year moving average, house prices have gone up a lot, and if they’re going down, they could easily go down and back up. There was always a kind of steady climb with dips along the way.”

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New poll shows majority of Canadians are cutting back on spending

The Real Estate Board of Greater Vancouver said the composite benchmark price for the region — often Canada’s hottest region — was more than $1.2 million in July, up about 10 percent from July 2021 and one decrease of two percent compared to June 2022.

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“One can only guess how much prices will fall,” said Sherry Cooper, chief economist at Dominion Lending Centres.

Markets, she said, tend to be very localized, and the swings or dips that some see may not be mimicked by others.

For example, she said Alberta hasn’t experienced the slowdown seen in many other Canadian markets because its energy sector is much stronger than it has been in the past.

However, Cooper found that home sales activity in the greater Toronto area, greater Golden Horseshoe area and parts of British Columbia around Vancouver have declined sharply.

“It’s the markets that have seen the 50 percent increase in home prices that have seen the biggest correction, and that’s to be expected because they’re the most expensive homes in Canada with the largest outstanding mortgages.”

© 2022 The Canadian Press

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