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The pandemic-triggered housing boom has shredded a number of long-standing assumptions Canadians have about real estate.
Rising mortgage rates could mean a spring slowdown for Canada’s housing market
The pandemic-triggered housing boom has shredded a number of long-standing assumptions Canadians have about real estate.
Distance from, not nearness to, downtown cores is now a key buyer desire. Communities that were unpopular with buyers two years ago because of a lack of jobs or amenities are some of today’s most active markets. Even taking out a gargantuan mortgage in the midst of a crushing global recession went from “undeniably risky” to “par for the course” seemingly overnight.
And this Great Real Estate Rethink continues: A new survey by real estate brokerage Royal LePage finds that 79 per cent of real estate professionals think sellers should list their homes this winter rather than waiting until spring 2022.
Winter is traditionally the slowest season for home sales in Canada. But buyers have already tossed aside so many real estate traditions. What’s one more?
The pro-winter listing sentiment is strong across all regions.
Realtors in British Columbia led the way, with 93 per cent of respondents in the province saying they would advise their clients to sell this winter; 87 per cent of agents in Quebec and 85 per cent of those in Atlantic Canada shared the same view.
The proportion of agents in favour of winter listings were lower in Ontario (72 per cent), Alberta (73 per cent) and the remaining prairie provinces, Manitoba and Saskatchewan (75 per cent).
While those numbers are all high, many of the real estate agents surveyed — at least half in every area of the country — were advising their clients to list in the winter even before the pandemic. The reason then is the same as it is today: A painfully low number of homes for sale has created a seller’s market so rabid that weather is the last thing desperate buyers are worried about.
“Typically we see a seasonal adjustment in real estate activity,” says Adil Dinani of Royal LePage West Real Estate Services in Vancouver. “However, last year, we saw one of the busiest winter markets in our history. Even if there are fewer buyers in the winter, it is unlikely there will be enough inventory on the market to satisfy demand.”
That could be especially true in Toronto, where there were only 7,750 homes left on the market at the end of October.
“That’s versus 17,000 last year,” says Cameron Forbes, general manager and broker at RE/MAX Realtron Realty in Toronto.
But Forbes still believes that a spring listing is better for sellers, pointing out that since 1999 there have, on average, been more homes on the market in the winter in the GTA than in the spring. If selling in a low-supply market is the goal, why not wait until the spring, when the market will be even more depleted?
“All things being equal, that’s a better time to sell your home,” he says. “That’s why agents will generally recommend that you wait to list in the spring market, when your home shows well and, frankly, when buyers are out looking to buy.”
You may have noticed that the areas where the preference for winter listings were lowest are in parts of the country where winter can be especially brutal. (Ontario’s placement in this category may have more to do with fears around what an extra three or four months might do to the province’s already sky-high prices.)
And this one could be particularly messy. Both The Weather Network and the Farmer’s Almanac are preparing Canadians for a potentially long, storm-filled winter.
Can sellers in hard-hit markets really plan on buyers being hungry enough to brave the elements and view properties when winter’s at its most miserable?
Regina-based Royal LePage agent Shayla Ackerman, no stranger to extreme winter weather, says listing in the winter is not something she would recommend unless a seller has no other choice.
“Our winter market slows right down,” she says.
But in Montreal, which also receives its fair share of colossal snow-dumps, Century 21 Immo-Plus agent Angela Langtry expects buyers to be out in droves.
“We are still in a low-inventory market, especially for houses,” Langtry says. “I always say that the serious buyers come out in the snow storms.”
Capitalizing on raging buyer demand is not the only reason to list your home this winter.
The Bank of Canada announced in late October that it is ending a key pandemic emergency measure: buying billions of dollars in bonds to keep interest rates low, including those attached to mortgages.
If mortgage rates begin rising, and mortgage amounts begin shrinking, buyers may have less buying power in the spring. Listing now may give sellers one last shot at enticing buyers while they have more money to play with.
But Paul Taylor, president and CEO of trade association Mortgage Professionals Canada, isn’t sure a rise in interest rates will impact buyers’ budgets in the next few months.
“Almost everyone is qualifying at a 5.25 per cent stress test rate today,” Taylor says, referring to the benchmark interest rate lenders use to evaluate mortgage applicants’ ability to repay their loans.
Even if the Bank of Canada were to raise interest rates by 100 basis points, or one per cent, over the next 12 months, Taylor says buyers who qualified at 5.25 per cent would still have at least 200 basis points worth of breathing room, meaning their mortgage budget “will be effectively unchanged.”
Taylor expects a 0.25 per cent increase in the BoC’s overnight rate, which should trigger a rise in variable mortgage rates, in the spring. He says two additional increases could occur before the end of 2022.
“I expect the media coverage of the tiny rate increases will scare many and slow the market, which is likely very good for everyone, but I don’t think we’ll see enough of a slowdown to erode prices,” Taylor says.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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