An unexpected surge in Canadian home sales and average prices in the first half of 2023 will likely lose steam in the second half of the year, predicts Rishi Sondhi, economist at Toronto-Dominion Bank.
Mr. Sondhi recently revised his national housing forecast for this year to reflect his view that sales will dip in the third and fourth quarters, reversing part of the surprising growth that was most pronounced in Ontario and British Columbia, while prices may still edge up but at a slower rate.
He said that during the market downturn of 2022 and early 2023, sales undershot economic fundamentals such as income and population growth. With the recent rebound, however, the gap has mostly been closed.
“It just shows the pent-up demand that was just waiting with bated breath,” Mr. Sondhi said in an interview. “People just pounced into the market.”
He said the Bank of Canada’s recent decision to increase its key interest rate by 25 basis points will likely put a chill on buyers who went rushing into the market after the bank paused rates earlier this year. Mr. Sondhi now expects a similar rate hike this month.
Mr. Sondhi added that the sharp rise in prices also worsened affordability, which could also hamper the market.
Mr. Sondhi updated his forecast before June sales numbers were in, but he said early signs were pointing to a soft month. Listings picked up slightly in June, but inventory remains low compared to historical levels, he adds.
“We’re still not seeing this surge in supply.”
While tight supply may nudge the average national price higher in the third quarter, he predicts prices to drop slightly in the fourth. He expects sales to be about 5-per-cent lower in the fourth quarter than the second.
Mr. Sondhi still expects to see modest growth in sales and the average price across the country in 2024, though he has trimmed his forecast to reflect a cooler pace of quarterly increases.
Real estate brokers say they are also seeing things slow down after a rush of sales in the spring.
Elise Kalles, broker at Harvey Kalles Real Estate Ltd., notes that the market moves in cycles, but her office is still seeing competition in some pockets. Ms. Kalles said one house listed with the firm recently drew 18 offers and sold for $1-million above the asking price of about $3.2-million.
Paul Maranger, broker at Sotheby’s International Realty Canada, has seen an increase in listings in recent weeks, but he said overall supply is still thin.
Mr., Maranger said that at this time of year, parents are busy with the end of their kids’ school year, and some homeowners spend much of the summer at the cottage. He said he expects normal sales volume for July and August, which typically move at a slower pace than the spring rush.
“I would say we are in light seller’s market territory,” he said, though he added that buyers are cautious if they believe sellers are asking too much.
Mr. Maranger says move-up buyers were hesitant last year in the upper tiers because many are self-employed or business owners. He said prospective buyers who were concerned about the health of the economy and the impact on their business put sales on hold.
“I think you can only hold back in Toronto for a certain period of time. Then you have to move forward.”
After the more relaxed summer market, Mr. Maranger expects to see the usual increase in listings after Labour Day. He predicts some homeowners who have been struggling with higher interest rates and inflation may decide to sell, but he’s not expecting a flood of supply.
“We’ll see anxiety sales,” he said. “But we’re not going to see panicked sales with silly low prices.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
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