End of the housing correction?
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Buyers to face ‘tight competition’ this spring
Buoyed by stable interest rates, buyers are returning to the real estate market in droves, only to find the number of available homes for sale is too low to satisfy demand.
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As a result, a real estate company has made “pretty dramatic” changes to its annual price forecast.
In December, Royal LePage predicted a two per cent drop in the average Greater Toronto Area (GTA) home price this year. It has since changed its tune and in its 2023 Market Survey Forecast, now predicts a 7.5 per cent year-over-year increase in the fourth quarter as competition for homes escalates.
“The GTA housing market started off the year with more robust activity than we expected,” says Royal LePage COO Karen Yolevski. “Right out the gate, many buyers that had been sitting on the sidelines while interest rates were rising reignited their search for a home.”
Once again, those buyers face a shortage of inventory. “Properties in desirable neighbourhoods that are competitively priced are receiving multiple offers, and while we are not seeing as many deals close tens or hundreds of thousands of dollars over asking like we did during the pandemic boom, there is every indication that buyers will face tight competition this spring.”
The aggregate price of a home in Canada dropped 9.2 per cent year-over-year to $778,300 in the first quarter of 2023. On a quarter-over-quarter basis, however, the aggregate price rose 2.8 per cent, as buyers take advantage of the Bank of Canada’s (BoC) decision last month to hold the interest rate at 4.5 per cent.
“This was the signal that so many Canadians were waiting for. The BoC’s rate hold was the green light that stability is returning to the market, and it has had a swift and significant impact on buyer demand,” Royal LePage President and CEO Phil Soper says.
In Toronto, the aggregate price of a home decreased 12.6 per cent year-over-year to $1,144,300 in the first quarter of 2023. That’s a 5.3 per cent increase over the prior quarter. During the same period, the median price of a single-family detached home decreased 9.3 per cent to $1,654,200, while the median price of a condominium dropped 10.3 per cent to $705,400, according to Royal LePage.
The Canadian Real Estate Association (CREA) has also tweaked its predictions. It expects the average price of a home to end the year 4.8 per cent lower than 2022 but believes prices will rise by roughly the same amount in 2024. Its prediction amounts to an average price of $670,389 this year and $702,214 next year, when prices are expected to increase by 4.7 per cent.
New listings have been dropping fast and are currently at 20-year lows. CREA predicts the number of houses that exchange hands will drop 1.1 per cent to 492,674 this year before rising 13.9 per cent to 561,090 in 2024.
Of course, nothing is carved in stone when it comes to the real estate market. CREA says risks to its forecast include whether an expected short and mild recession in the middle of 2023 turns out to be more severe and longer lasting than anticipated.
The BoC suggests it will maintain the interest rate at its current level if inflation continues to come down but won’t hesitate to raise interest rates again in the future if necessary.
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