Is the Canadian real estate market on the brink of a crash? After a long period of jam-packed open houses, intense bidding wars, and extreme price increases, several indicators point to a noticeable slowdown this year following a very hot market in 2021. Read on to uncover some of the telltale signs pointing to a further cooldown of Canada’s real estate market.
A drop in sales and home prices
The Canadian Real Estate Association’s (CREA) October national housing market statistics showed that the actual (not seasonally adjusted) monthly activity in October 2022 came in 36 percent below October 2021. The actual (not seasonally adjusted) national home prices also dropped by 9.9 percent from the same time last year, averaging only $644,643 across all home types.
The Toronto Regional Real Estate Board's (TRREB) October market watch revealed that locally, a total of 4,961 new homes were sold in the GTA. This number represents a whopping 49.1 percent decrease compared to the same time last year. In addition, home prices averaged $1,089,428 across all home types – a staggering 5.7 percent decrease compared to October of 2021. Furthermore, the market saw an 11.6 percent drop in new homes for sale, with only 10,390 new homes listed on the MLS, a level not seen in 12 years.
Longer listing times
More agents are noticing that prospective homebuyers are taking their time as they anticipate an even more significant drop in home prices while sellers have yet to adjust to the reality of lower market prices. Frenzied bidding wars and rapid sales have become a thing of the past as there is no longer an urgency to buy. According to TRREB’s October Market Statistics, the average number of days a property is on the market is 33 days, compared to an average of 18 days on the market in October 2021. This represents an 83.3 percent increase compared to the same time last year.
Buyers and sellers continue demonstrating patience
Buyers are making slower, more informed decisions and are doing more meticulous research before committing to a purchase. Now buyers really take their time to research the selling price of comparable homes in the area and the fair market value of the property. They have also started looking at the sale-to-list price ratio and the number of homes available in the area to ensure they get the best possible deal on their new home.
Sellers are sitting on their hands and watching from the sidelines as they anticipate further price drops. Those not urgently selling are waiting for renewed market vigour before making their move and putting their homes on (or back on) the market. Meanwhile, those trying to make a quick sale either have to reduce their asking price or accept offers below the asking.
John Lusink, President of Right at Home Realty agrees with other industry experts who expect GTA home values to drop another 8 to 10 percent before the year ends, bringing relief to potential home buyers. Nationally, benchmark prices are expected to fall even further by next spring, especially in Ontario and BC, which could help lower the cost of homeownership next year. However, further interest rate hikes from the Bank of Canada will exacerbate affordability pressures before then.
“Home sales saw a minimal increase of 1.3 percent from September to October 2022 on the MLS, and while this is the first month we had gains since February 2022, the expectation is that transactions overall will continue to decline into the winter months. Based on the data, the next few months will be challenging, so it is more important than ever for agents to continue providing support and advice to clients who are trying to navigate this uncertain market,” said Lusink.
If you are interested in better understanding what is happening in the current market and what it means for both buyers and sellers moving forward, reach out to a member of the Right at Home Realty team. We are here to support and educate our clients every step of the way and provide advice on how to navigate the current market conditions.