Steady course or turning point? March 2022 real estate market update
For almost the last two years, the real estate market has continuously been breaking records nearly every month. While this might be good news for sellers and those already invested in the market, it hasn’t been so great for those trying to get into the market. Despite a strong start to the year in accordance with last year's performance, recent conditions could also spell the start of some changes in the market.
According to Canadian Real Estate Association’s (CREA) data released last month, the prices of homes in Canada, as well as the number of sales, have once again continued to climb. On the national level, the average price of homes rose almost 3% since the end of last year and over 20% since January 2021. Now, an average detached home in Toronto or Vancouver has broken the $2 million dollar mark and continues to rise. And, with just 1.6 months of stock available nationally, January marked “the tightest market conditions ever recorded.”
However, there are signs that things could begin cooling off as we progress through the year. Though nothing is certain yet, some analysts are optimistic.
In what a new RBC Economics report has called a “turning point”, it seems that some markets could be on their way to more balanced conditions. Notably in Calgary and Edmonton, the number of new listings jumped significantly as much-needed sellers entered the market. Should that trend continue, it could do much to relieve pent-up demand in the market and help with eventual levelling off. Meanwhile, the report points out that areas like Montreal and Vancouver also showed (albeit smaller signs) pointing towards an easing of tight market conditions.
Ideally, a hot spring market with a new influx of sellers could help to provide much-needed housing stock and reduce some upward pressure on the market.
Quoted in the CREA report, Cliff Stevenson, CREA’s New Chair, said that “the question is will that supply be overwhelmed by demand as it was last spring, or will we start to see the re-emergence of some of the many would-be sellers who have been hunkered down for the last two years?”
It’s also very likely that the rise in interest rates will play its own role in changing the course of the housing market. Recently, the Bank of Canada finally raised their record low target interest rate, with more hikes predicted to follow in the coming months for a significant increase over the course of the year. By raising the cost of borrowing, buyers will be forced to consider lower-priced homes and this can contribute to slowing down price growth.
While cheap houses are still a far-off dream, a predicted levelling off of the housing market is starting to seem more realistic as time goes on. While large changes in the market will likely not be seen for a few months yet, 2022 is shaping up to be a very interesting year in Canadian real estate.