Softer Fall Housing Market Expected Due to High Interest Rates, Low Inventory

Re/Max Canada is projecting a softer housing market this fall, with the national average residential sale price across all home types remaining flat and sales subdued until the end of the year. The real estate organization’s 2023 Fall Housing Market Outlook Report puts the blame for the slowdown on high interest rates and a persistent inventory shortage, with millennial and generation-Z buyers likely to be hit the hardest by the limited options in the market.

A Leger survey, commissioned by Re/Max, indicates that 55% of gen Z and 49% of millennial respondents have had to change their housing plans due to the lack of affordable options.

Adding another layer of complexity to the situation is the Bank of Canada upcoming interest rate decision on Sept. 6. According to the same Leger survey, 33% of Canadians interested in the housing market plan to wait for the Bank of Canada’s announcement before making any decisions.

Younger Canadians are particularly sensitive to Bank of Canada interest rate announcements; 47% of gen Zs and 52% of millennials say these announcements will influence their decision on when to buy or sell.

“While we await a comprehensive national housing strategy, the market is beginning to ease in some regions, bringing some relief from the exorbitant prices we’ve seen in recent years,” Christopher Alexander, president of Re/Max Canada said.

Elton Ash, executive vice-president of Re/Max Canada, stressed the importance of tackling the housing supply issue. “The Canadian housing market has historically provided homeowners with robust returns and financial security. For its long-term health, however, we need to address the housing supply shortage across the nation.”

In supporting data, 74.1% of Re/Max broker regions surveyed from January to July 2023 reported a decrease in the number of listings. Sales transactions in these regions also saw declines, ranging from a drop of 4.1% to as much as 39.6%, year over year.

While Re/Max predicts that the national average for residential sales and prices across all home types will remain flat through the end of the year, the regional outlook varies significantly. For instance, Sudbury and Calgary are expected to see the largest average price increases this fall, both rising by 5%. This uptick will elevate the average home prices in these cities to $505,303 and $564,005, respectively. Conversely, Durham Region and Peterborough are projected to experience a 5% decline in average home prices, bringing them down to $1,024,845 and $650,777, respectively.

In terms of sales volume, St. John’s could face a significant 30% decline by year’s end. Meanwhile, Calgary is also expected to see a decrease, but a less severe one, with a 20% drop in sales according to estimates.

In the Greater Toronto Area, the housing market is poised for a 2.5% uptick in average prices, while sales volumes are expected to remain steady with zero change. Vancouver is anticipated to experience a 2% decline in average home prices along with a 5% decrease in sales volumes.

In Ottawa, Re/Max forecasts a decline in residential sale prices for the upcoming fall season, estimated to range between 2% and 5%. According to Ottawa realtor Nick Polegato, the driving forces for today’s buyers extend beyond price considerations and inventory availability.

“If prices were going to be the biggest variable to buyers right now, we would see more sales during the months of July and August when the market does seem to be a little bit more stagnant historically,” Polegato said. “I think buyers would be out, even with limited inventory, if there was strong buyer confidence right now, because home prices are stable.”

Alexander suggested the softening fall could be setting the stage for a rebound in the new year. “If the fall market serves as an early indicator for 2024, we could witness a very active first quarter as both buyers and sellers take advantage of stabilizing prices,” Alexander said.

Re/Max said the Leger survey involved 1,517 Canadians aged 18 and over from July 21 to 23, 2022. Using a 400,000-member panel with a 90% retention rate, the survey has a +/- 2.5 per cent margin of error, 19 times out of 20, comparable to a similar-sized probability sample.

Source: Financial Post

Canadians Are Co-owning Their Homes with Families, Even Friends, and Its Opening up More Opportunities

Amid rising real estate prices and soaring mortgage rates, home ownership has become a distant dream for many Canadians. But some prospective buyers are finding creative solutions to realize their dream, including co-owning their properties. A new Royal LePage survey found Canadians are buying homes jointly with family, and even friends, to combat the housing affordability crisis.

“In an environment where home prices and interest rates have risen quickly and sharply, and where the threshold to qualify for a mortgage has become much more challenging, Canadians are pooling their resources and buying homes together,” said Karen Yolevski, chief operating officer of Royal LePage, in a press release sharing the results of the survey, which polled more than 500 Canadian co-owners. “In cases where homebuyers cannot afford to purchase on their own, they are combining their buying power with their parents, children, siblings or even friends,” she added.

Roughly 6% of Canadian homeowners co-own their property with someone other than their significant other or spouse, according to the survey. Of those, 89% co-own with family members, while 7% are in an agreement with friends. An additional 8% share their property with someone who is neither a friend nor family member. The most common co-ownership arrangement is between a parent and a child, followed by between siblings.

For roughly three in four co-owners, affordability played a large role in their decision to co-purchase their home, the study found. “By dividing the cost of a home between more people, Canadians cannot only get their foot on the property ladder more easily, but also expand their home search to more desirable locations or larger properties that may not have been accessible with their budget alone,” explained Yolevski.

For some prospective buyers, the benefits of opting for co-ownership could be substantial, the survey suggests. Of those surveyed who co-own and cohabitate with another person, nearly half said they would not have been able to afford a home on their own. A further 38% said they could afford a larger property or one in a more desirable neigbourbood because of their co-ownership arrangement.

But Yolevski also noted that co-ownership also comes with various obligations. “Opting to co-own with friends or family is not as simple as signing a piece of paper next to someone else’s name — co-owning a home often comes with meaningful lifestyle changes, and requires in-depth conversations over financial, legal and personal obligations,” she said. “Regardless of whether you live in the home with your fellow co-owners or not, the responsibilities of owning a home with other people are shared, but so are the benefits.”

Source: The Star