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17 Real Estate Forecasts That Have Tried to Predict the Impact of COVID – Toronto Storeys

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This weekend will mark two months since a state of emergency was first declared in Ontario.


Millions of jobs have been lost, tens of thousands of businesses have been affected, and thousands of people have died. And throughout all of it the lockdown measures, the daily updates, and the terrifying economic realities it seems everyone in the real estate industry has taken a shot at summing up both the current and coming housing climate. (Yes, we were not immune either.)

So, in an attempt to help you keep up with the dizzying level of real estate decrees that have been released in the last dozen or so weeks, we’ve compiled a timeline of forecasts, prognostications, pontifications, prophecies, exaggerations, and conjectures so you can form your own opinion of who’s looking at the present in the right light, and who’s best positioned to accurately predict the future.

Forecasts

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RBC April 1

Headline: Home Sales in Canada Could Drop as Much as 30% This Year: RBC

Summary: Canada’s housing market could see a 30% decline in home resales this year, hitting a 20-year low of 350,000 units due to both physical distancing restrictions and economic uncertainty caused by the coronavirus outbreak.

Quotable: “We think the recovery will come in stages—taking buyers up to a year to regroup and rebuild confidence amid high unemployment.”

Read: The Full Article

RBC April 6

Headline: Experts Say “Low Risk” of Housing Market Collapse: RBC Report

Summary: While RBC economist Robert Hogue expects housing price support to wear down in the weeks ahead, RBC sees a “low risk” of a market collapse – at this point.

Quotable: “We believe the extraordinary policy response from all levels of government and the Bank of Canada, as well as accommodating measures offered by financial institutions, will soften the blow.”

Read: The Full Article

RE/MAX April 7

Headline: RE/MAX: Odds of Coronavirus-Related Housing Market Collapse are Low

Summary: “To burst, or for a real estate market collapse to take place, there would need to be a stagnant demand, with an influx of supply, leading to a sharp drop in prices.” And RE/MAX doesn’t think that’s very likely in the country’s hottest markets.

Quotable: “What is more likely to happen, as a result of this public health crisis, is more of a levelling off, rather than significant dips. The prices have been climbing at such a steep, unsustainable rate, that they were bound to be reined in at some point. However, with levels of housing inventory so low in so many of the country’s hottest markets, it’s unlikely that any price change will be jaw-dropping, or even noteworthy.”

Read: The Full Article

Royal LePage April 14

Headline: Royal LePage Releases Canadian Market Survey Forecast

Summary: If the measures currently in place across the country are lifted before the end of the second quarter, Royal LePage is forecasting that overall prices for Canadian homes will end 2020 relatively flat. If, however, COVID-19 restrictions remain in effect throughout the summer, this could drive home prices down by 3% year-over-year to $627,900.

Quotable: “From our experience with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020. Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home.”

Read: The Full Article

Capital Economics April 20

Headline: Canadian Home Prices Could Drop as Much as 5% Due to Coronavirus

Summary: Despite the hot start to spring, COVID-19 disruptions are set to decrease prices in the coming months.

Quotable: “Capital Economics is “pencilling in a relatively modest fall” in house prices of 5% in the coming few months.”

Read: The Full Article

Teranet-National Bank Composite House Price Index (HPI) – April 21

Headline: Canadian Home Prices Expected to Lose Momentum

Summary: Teranet says it expects prices are going to start to cool after real estate boards reported a “clear break” in activity during the second half of March due to the coronavirus outbreak.

Quotable: “The loss of momentum is expected to be most prevalent in the metropolitan markets located in central and eastern Canada and in cities like Toronto, Hamilton, Ottawa-Gatineau, Montreal, and Halifax.”

Read: The full article.

TD – April 29

Headline: TD Now Forecasting Toronto Home Prices to Increase By 7.8% in 2020

Summary: In light of the pandemic, TD economists expect home sales in Canada will remain below their pre-COVID-19 levels for the rest of 2020, with the numbers of transactions expected to plunge in April before gradually recovering in the months to come as the country reopens and social distancing measures ease and workers return to their jobs.

Quotable: “TD said its forecasts are subject to an “extremely high degree of uncertainty.”

Read: The full article.

CIBC – May 4

Headline: CIBC Forecasting Canadian Home Prices to Drop 5-10% Relative to 2019 Levels

Summary: CIBC economists Benjamin Tal and Katherine Judge suggests that the effects of COVID-19 on Canadian home prices won’t be fully felt until 2021, but that they will drop between 5-10%.

Quotable: “Overall, as the fog clears, we expect to see average prices 5-10% lower relative to 2019 levels, with high-cost units in the high-rise segment of the market seeing the most notable price declines.”

Read: The full article.

Altus Group – May 5

Headline: Housing Sector in Canada Expected to Rebound By End of 2020: Altus Group

Summary: Peter Norman, Vice President and Chief Economist at Altus Group, acknowledges that the second and third quarters of 2020 are going to be “disaster zones” for the housing market, but believes that as safety measures begin to lift in the months to come and consumers return to spending and investing as they usually would, he expects to see sectors to start come back very quickly – including housing.

Quotable: “We shouldn’t “underestimate how fast things come back.”

Read: The full article.

DBRS Morningstar – May 8

Headline: Home Prices in Toronto Could Drop More Than 14% By 2023

Summary: Regardless of the various income support programs from the federal government and mortgage deferral options from the banks, the rise in unemployment could lead to the inevitably of more households falling behind and potentially defaulting on mortgage payments, which could, in turn, lead to home prices falling in the coming years.

Quotable: “In the moderate scenario, mortgage arrears nationwide increase to approximately 65 basis points in 2020 and then gradually decline, while home prices fall by 10% cumulatively through 2022. The adverse scenario features mortgage arrears rising to 100 basis points and a 15% correction in housing prices by 2022.”

Read: The full article.

Home Prices and Sales Updates

MPAC toronto home sales
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Zoocasa April 1

Headline: Coronavirus Has Pushed the GTA into a Balanced Housing Market

Summary: When the sales-to-new-listings ratio (SNLR), which is described as “a measure of market competition calculated by dividing the number of sales by the number of new listings”, is between 40%-60% it indicates a balanced market, anything above and below that threshold reveals sellers’ and buyers’ markets, respectively.

Quotable: “The numbers recorded in March demonstrate there has been a noticeable shift in market conditions in a very short period of time.”

Read: The Full Article

CREA – April 15

Headline: Home Sales in the GTA Down Over 20% Month-Over-Month in March

Summary: According to CREA, home sales recorded over Canadian MLS® Systems dropped by 14.3% in March 2020 compared to February. The GTA was one of the hardest-hit markets, seeing a 20.8% decline.

Quotable: “Canadian home sales and listings were increasing heading into what was expected to be a busy spring for Canadian REALTORS®,” said Jason Stephen, president of CREA. “After Friday the 13th, everything went sideways.”

Read: The full article.

Rental Market Insights

St. Lawrence Neighbourhood

Padmapper April 15

Our Headline: Average Rent for Toronto 1-Bedroom Stays Highest in Canada

Summary: The average price to rent a 1-bedroom apartment in Toronto remains the highest in Canada, despite the disrupting presence of the ongoing COVID-19 pandemic.

Quotable: “With the strict social distancing measures currently in place and more residents without work as a result of the pandemic, a decline in rental market activity is to be expected.”

Read: The full article.

Urbanation April 20

Our Headline: Toronto Renters Could See Some Relief in the Post-COVID Market

Summary: The outlook for rents will largely depend on the severity and duration of the economic downturn — which remains highly uncertain at this point — and the resulting impact the pandemic has on vacancies.

Quotable: “As rental demand declines as job losses mount, incomes are reduced, and immigration shrinks, the slowing in the GTA rental market that appeared in the last half of March will progress for at least the next few quarters given the current economic outlook. The impact on rents will be something to watch, which will also be influenced by the timing of the record number of units that were expected to complete this year.”

Read: The full article.

TRREB May 7

Our Headline: Average Rent for Toronto 1-Bedroom Drops Nearly 3% in April Year-Over-Year

Summary: The average rent for a 1-bedroom reached $2,107, down 2.7% compared to April 2019. The average two-bedroom rent was ‘just’ $2,705, down 4.1% during the same time period year-over-year.

Quotable: “With the strict social distancing measures currently in place and more residents without work as a result of the pandemic, a decline in rental market activity is to be expected.”

Read: The full article.

Rentals.ca May 8

Our Headline: Apartment Rents in Canada Could Drop Following Pandemic: Report

Summary: As a result of COVID-19, Canada is seeing less immigration, fewer international students, and with the border now closed, there won’t be nearly as many seasonal and part-time workers, who are all typically renters. This coupled with Rentals.ca’s prediction that some short-term rentals convert to long-term rentals, could lead to rents declining.

Quotable: “Renters who put off moving when the pandemic hit are now starting to resume their apartment search in the hopes that Canada’s lockdown will end in the coming weeks.”

Read: The full article.

Rentals.ca May 13

Our Headline: Average Rent for 1-Bedroom Apartment in Toronto Drops 6% Year-Over-Year: Report

Summary: At the beginning of the COVID-19 lockdown, there wasn’t a noticeable decline in rental rates for condominium and rental apartments… however, that changed dramatically in April as landlords responded to this lower-demand market by adjusting their asking rents.

Quotable: “With the gradual opening of the economy, this may be the low point for rental rates in some time if tenants feel comfortable enough to move.’

Read: The full article.

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Edmonton could be headed toward housing supply shortage, real estate industry leaders warn – CBC.ca

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Supply chain problems, rising interest rates and more people moving to Alberta could contribute to a housing supply shortage in Edmonton, according to multiple industry leaders.

These trends, plus the rising cost of construction, were front and centre during multiple panel discussions at the Edmonton Real Estate Forum — a large industry conference held at the Edmonton Convention Centre — on Wednesday.

“All things are lining up for there to be a housing shortage in Edmonton in 12 months,” said Rohit Gupta, president of Rohit Group of Companies.

Following a panel discussion on the multi-residential market, Gupta told CBC News that real estate developers may not be able to build houses fast enough to meet rising demand.

Supply chain snags

Multiple commercial real estate industry leaders, participating in a panel discussion on retail trends, said supply chain problems keep them up at night.

There are long lead times on mechanical items, including refrigeration, gas coolers and transformers — perhaps because of pent-up demand during the COVID-19 pandemic, said Jarrett Thompson, chief operating officer at Cameron Corporation.

The delays are resulting in more time-consuming and expensive commercial and residential projects, he added.

“Despite there being a market right now, a lot of the builders are pulling back, which is creating some major challenges,” he said.

Among the many challenges is a lack of nails, linked to the war in Ukraine, said Gupta, of Rohit Group of Companies.

“It’s everything,” he said. 

“At some point, we’re so numb to the pain.”

Few executives predict these problems will disappear any time soon.

Darren Quayle, vice president of Alberta client services for Oberfeld Snowcap, expects supply chains to get back to normal in 18 months to two years.

Population pressures

Statistics Canada data shows Alberta saw the most interprovincial migration during the last three months of 2021, marking the first time since 2015 that the province led the country in that metric.

Most of those people came from Ontario.

Gupta said most of the people moving from Ontario to Alberta have settled in Calgary, but Ontarians’ interest in the Edmonton market has been accelerating.

The relative affordability of real estate in Alberta is a key part of their decisions to move, he said.

“We’re seeing people [from Ontario] buying houses sight-unseen.”

During Wednesday’s multi-residential housing panel, Strachan Jarvis, managing partner of real estate investments for Toronto-based Hazelview Investments, pointed out that Canada welcomed a record number of immigrants last year but housing supply has not caught up.

“We simply are not building enough,” he said.

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Price fixing has sent Realtor commissions soaring in an already hot market, lawsuit alleges – CBC News

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Much of the discussion about Canada’s real estate market has been dominated by the meteoric rise in the cost of housing. 

But what’s often missing from that conversation is the parallel increase in what Canadians pay in real estate commissions nearly every time a home is bought or sold. 

For example, a brokerage representing a buyer in 2005 in the Greater Toronto Area would have earned a commission of about $8,795 on the average single-family home — while in December 2021, the buyer’s brokerage would earn about $36,230, or four times more on that same home, according to Dr. Panle Jia Barwick, a leading economist on the real estate industries commission structure. 

To put that jump in perspective, the median household income increased by just 14 per cent between 2005 and 2019, after adjusting for inflation. 

That discrepancy is just one of the points laid out in a recent lawsuit, alleging price-fixing and anticompetitive behaviour in Canada’s real estate market.

In the Greater Toronto Area, the average real estate commission exceeds $62,000 before tax. (Patrick Morrell/CBC)

The class-action case launched on behalf of Toronto resident Mark Sunderland on April 9, 2021, claims that some of the country’s largest brokerages, including ReMax, Century 21, and IproRealty Ltd. among others, as well as the Canadian Real Estate Association and the Toronto Regional Real Estate Board, have “conspired, agreed or arranged with each other to fix, maintain, increase or control the price … for buyer brokerage services in the GTA.”

Commission structures vary across the country, but typically real estate agents and their brokerage charge a percentage-based commission on the sale price of a home. In Alberta and B.C., it’s seven per cent on the first $100,000 and three per cent on the balance. In other parts of the country, commissions range between four and five percent. 

The allegations

While the seller pays the full commission, it’s split between the brokerage representing them and the one representing the buyer. 

Sunderland’s lawsuit argues that the agreement known as the buyer brokerage commission rule, created by the Toronto Residential Real Estate Board and Canadian Real Estate Association, effectively forces sellers of residential real estate listed on the Multiple Listing Service (MLS) to pay the commission of the buyer’s real estate brokerage.

Similar practices exist within many other real estate boards across the country.

This arrangement has thwarted competition in the market by pushing sellers to pay for something they would not pay for in the absence of this agreement, the lawsuit argues — and it negates the ability to negotiate the price or quality of the service.

Stephen Brobeck is a fellow with the Consumer Federation of America. He says with respect to commissions, the real estate industry functions as a cartel. (CBC)

“It’s not a typical smoky room conspiracy; it’s out in the open,” said Garth Myers, a partner in Kalloghlian Myers LLP,  the law firm that filed the case on behalf of Sunderland and anyone who has sold a home in the GTA since 2010. 

The effect of this alleged price-fixing can be felt by those who don’t offer the standard commission rate, said Barwick, the economist focusing on the real estate industry’s commission structure. 

The buyer brokerage commission rule “creates the incentive and ability for buyer brokerages to ‘steer’ buyers away from residential real estate properties where sellers offer lower than the norm buyer brokerage commissions,” she wrote as part of research commissioned by Kalloghlian Myers LLP for the case.

Merely the fear that this could happen is enough to pressure sellers into offering the standard commission, she writes.

The practice of steering is further enabled by Realtor.ca, which allows real estate agents and brokers to see the amount of commission on offer but hides the information from public view.

Similar lawsuit certified in the U.S.

Sutherland’s lawsuit is similar to a class-action case underway in the U.S against the National Association of Realtors and America’s largest real estate brokerages. 

The U.S class action, which was certified last month, also alleges that anticompetitive conduct has taken place within the real estate industry, causing U.S. home sellers to pay inflated commissions. 

Using hidden cameras, Marketplace producers found some real estate agents steering potential buyers away from low-commission homes, a practice that breaches the law. (CBC)

“Tens of billions of dollars are at stake,” said Stephen Brobeck, a senior fellow and former executive director of the Consumer Federation of America, a non-profit organization based in Washington, D.C., whose research has helped inform the U.S. case.

“In terms of commissions, the industry is striving to maintain a pricing cartel,” said Brobeck, noting it’s something that’s happening in the U.S. and in Canada. 

On the sale of the average Canadian home, which is now $746,000, the full commission — what’s split between the buyer and seller’s brokerages — amounts to between $26,330 and $37,300 before tax. In a market such as Toronto, the average commission exceeds $62,000 before tax. 

When Sunderland sold his home, he paid “the standard 2.5 per cent” commission to the buyer’s agent and their brokerage, his lawyer said. 

“His view, and the view advanced in the case is, the reason he had to pay [the 2.5 per cent] was because of this price-fixing conspiracy among the various brokerages in the GTA,” Myers said.

“It’s the market that sets the rate, not MLS rules or collusion between brokerages.”​​​​​​– Rui Alves, CEO iPro Realty Ltd.

In March 2022, the Canadian Real Estate Association and the Toronto Regional Real Estate Board brought a motion to dismiss the entire action as having “no reasonable cause of action.” That motion will be heard in the fall.

Another defendant in the lawsuit said he feels the case is without merit. 

“Our business is very competitive,” said Rui Alves, chairman and CEO of iPro Realty in a statement to CBC News. “It’s the market that sets the rate, not MLS rules or collusion between brokerages.”

iPro Realty does encourage sellers to offer the prevailing rate for the area — or may suggest offering a higher commission rate to the buyer’s brokerage in a slower market, he said. 

“This proves that in no way are our fees fixed but simply reactive to competitor fees in the area, just like any other competitive business would do.”

CBC News contacted ReMax and Century 21; while Century 21 Canada said it doesn’t believe there is merit to the claim, it would not comment further. 

ReMax said it wouldn’t comment, given the ongoing litigation.

Steering and real estate commissions

A 2021 Marketplace investigation into the issue of steering by real estate agents found that consumers’ fears around the issue are not unfounded.

To test if real estate agents would indeed steer buyers away from a low-commission home, Marketplace producers went undercover, posing as homebuyers looking for a home in Vaughan, Ont. As would-be buyers, the team asked three local real estate agents to book viewings at three properties on the market, including one offering only one per cent commission to buying agents instead of the 2.5 per cent considered standard for the area. 

While one agent was upfront about the low commission and offered to negotiate the purchase anyway, the other two agents did not tell the buyers about the commission — and discouraged or thwarted them from seeing the home. 

WATCH | Marketplace investigation into real estate ‘steering’:

Real Estate Secrets

7 months ago

Duration 22:30

Investigation catches real estate agents breaking the law to keep commissions high, hamper competition and block private sellers.

One of the agents steered the buyers by telling them the house was overpriced by $200,000 and said the owners would not budge on the price, which was not the case. The other agent told the buyers she was unable to book a showing and suggested the property might have tenants, a turnoff for many people wanting to move in themselves. The owners of the property told Marketplace they did not receive a showing request from this agent.

Further to that test, producers called 25 real estate agents across the country while posing as sellers interested in listing a home. When the agents were asked about lowering the commission rate for the buyer’s brokerage, 88 per cent of the agents warned against doing so. 

“Although they’re not supposed to do it, some agents may be very cognizant of what they’re getting paid and push their buyer to another home,” said an agent in Halifax.

“I have had agents say to me, ‘You know we’re looking at two houses and they’re both a good fit, but I’m definitely sort of massaging them towards yours because there’s more in it for the Realtor,’ ” said another agent in Winnipeg. 

The Canadian Real Estate Association (CREA) and Ontario’s regulator, the Real Estate Council of Ontario (RECO) would not talk to Marketplace about the investigation. However, shortly after learning about the findings, RECO issued a notice about steering to the more than 93,000 real estate agents, brokers and brokerages then under its purview, noting that such behaviour breaches its code of ethics.

“In addition to being illegal, the conduct undermines consumer protection, consumer confidence and the reputation of the real estate profession as a whole,” the notice said.

Still, it’s rare to see sellers offering rates lower than the standard buyer’s commission. According to Toronto real estate agent Alan Spivak, sellers offering commissions of less than 2.5 per cent to buyer brokerages in the Toronto area represented less than one per cent of total listings at the time of his review. 

“This is consistent with my experience for all residential real estate in the GTA since at least 2010,” he wrote in an affidavit included in Sunderland’s statement of claim.

How to increase competition

If there were no buyer broker commission rules in place, Barwick writes, services would become more competitively priced — buyers would pay for their own representation and could negotiate pricing or forgo the service altogether. 

This is already the case in the U.K. and Australia. There, buyers and sellers pay for their own representation and commission rates are lower.

In Australia and the United Kingdom, buyers and sellers pay for their own representation in real estate transaction and there’s more competition as a result. (Norm Arnold/CBC)

“That would also encourage sellers to negotiate more vigorously with their listing agents and those commission rates would most likely come down too,” Brobeck said. 

Brobeck’s own research has determined that “decoupling” real estate commissions in this way could drop standard rates by one to two per cent over a couple of years.

The Canadian Real Estate Association told CBC News it would not comment on the Sunderland case as it’s before the courts.

The Toronto Regional Real Estate Board, another plaintiff in the case, said it “has no involvement with and does not consider or discuss REALTOR® commissions.”

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Worry, buyer's remorse high as real estate market slowdown materializes – Ottawa Business Journal

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A wave of buyer’s remorse is taking shape in several heated real estate markets, after housing prices started dropping and the number of sales slowed over the last two months.

Realtors and lawyers in Toronto and Vancouver say they have noticed buyers looking at what options they have to get out of a purchase and sellers hoping to ensure one goes through because conditions have shifted dramatically from the previous highs and frenzied pace.

The country experienced a 25.7 per cent drop in the number of homes sold over the last year and a 3.8 per cent slide in housing prices between March and April, the Canadian Real Estate Association said Monday. The average home price last month totalled $741,517.

Such numbers have prompted some sellers to explore lawsuits to ensure transactions move forward and other purchasers to worry about the value of pre-sale properties they bought years ago but have yet to take possession of.

“With today’s real estate prices, there’s really no option but to go all in and if you’re going all in, and then suddenly you’re realizing that perhaps you made a bad bet and there’s a way out of that bet, you’re going to do whatever you can to get out,” said Mark Morris, a Toronto real estate lawyer.

In recent weeks, he has seen nine cases where buyers want to back out of deals but on Monday alone was approached by three sellers keen to use legal channels to keep purchasers from walking away.

Morris doesn’t call the encounters a trend because it’s unclear how many other lawyers are seeing the same spate, but three queries in a day is his new record. He used to see one case of that nature every few months.

“Purchasers are looking at the existing crisis, and in the best of times, they feel they overpaid, but now they have objective proof that they’ve done so because markets have started to pummel and fall and really shows no signs of slowing down,” said Morris.

“Many of those buyers are faced with the option of moving forward or upping and walking.”

People get “spooked” every time the market turns and explore what they can do about deals they signed, but few end up walking away because it’s hard to get out of such transactions, said Phil Soper, CEO of Royal LePage.

He thinks the exception to this pattern came in 2020, when the COVID-19 pandemic broke out and people wanting out of transactions had so many unknowns on their side.

Most buyers trying to end a deal this year won’t be successful because there is no legal way out, but such cases are also impractical for sellers, Morris said.

“Is a seller really willing to pursue a buyer that has no assets? Is the seller really going to go through three years of courts only to find that they have a judgment that can’t be pursued?” he pondered. “Are they really ready to put up the amount of money that it will take to pursue this to the ends of the earth if they’re able to resell? Perhaps not.”

In cases where the buyer has put money into a seller’s trust account, that money can only be released with a court action, the closing of the deal or a mutual agreement not to pursue the sale, said Morris. He’s seen buyers agree to give the seller the money, if the seller mutually agrees to end the deal.

If a deal ends, brokers can sue for their lost commission but not many explore this avenue because it’s “not a good look” to take legal action against a client, who might still turn to you when they try to sell the home from the failed transaction again, said Morris.

While Tirajeh Mazaheri hasn’t seen legal action in Vancouver, the Coldwell Banker Prestige Realty agent has seen buyer’s remorse and worry crop up among investors who purchased pre-construction homes a few years ago but have yet to take possession of them.

“A lot of those people are thinking, ‘Is the market going to be able to justify this price or keep up with the price I paid and can I get this money back if I want to sell in a year?'” she said.

The people who purchased in early rounds of pre-construction sales for a building are already ahead of the curve, but those who bought later will have to wait longer to break even or make a profit, she said.

Even though worry is at a high, Mazaheri and Soper agree the markets do rebound and homes are still a valuable investment.

“Anyone who bought a home in 2021 in this country, if they bought anywhere near market price, their home is going to be worth more in 2021,” said Soper.

“Will it be worth more one year from now? That’s harder to predict ? but even a year from now the likelihood of that home being worth less than it is today is smaller.”

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