Over the past ten years, we’ve seen a steady climb in real estate prices across Ontario. Despite some fluctuations over the years, prices have remained high while interest rates have remained relatively low. The onset of the pandemic 18 months ago caused a surprising spike in house prices, especially in the suburbs, as families moved outside city limits for more space and a new remote work lifestyle. Lack of inventory led to bidding wars becoming the norm, and it wasn’t unusual to see a home sell for $100K over asking.
Almost two years later, the market is beginning to stabilize with prices levelling out, yet the overall average sale price has not dropped.
“There is such low inventory that if a property gets nine offers, the eight whose offers aren’t accepted are still looking for a home,” explains Rina DiRisio from Royal LePage Real Estate Services Ltd.
Despite a slight increase in inventory in recent months, many potential sellers are too nervous about selling. “There’s a real reluctance to sell right now,” explains Rina. “Homeowners are afraid if they sell their home, even for top dollar, they won’t be able to find a home to move into, and this is a real concern.” It also contributes to the low inventory issue, creating a bigger problem in the market.
WHAT WILL IT TAKE TO CAUSE A MARKET CORRECTION?
“Without any real government intervention, the only way a market correction can happen is if interest rates go up, and that’s horrible news for homeowners,” says Jordan Zalter of RE/MAX Escarpment Realty in Ancaster. “At the same time, the only way supply will increase is if people are forced to leave their homes, also not a good solution.”
Despite some rumblings of housing correction promises during the federal election, the government has lacked any real leadership to solve the affordability issues.
The Ontario Real Estate Association (OREA) has a proposed plan to make homeownership an attainable dream once again, and it would serve the government well to listen. The focus centres around two main areas: Lowering the land transfer tax for first-time homebuyers and introducing Save the Canadian Dream Act, 2021 (to build on the current Housing Supply Action Plan). The Act would permit innovative housing solutions, stop
money laundering in the real estate market and end exclusionary single-family zoning. For more information, visit https://bringaffordabilityhome.com/our-plan
JEOPARDIZING A GENERATION?
For first-time homebuyers, the dream of homeownership continues to feel out of reach. Tighter lending rules went into effect in July 2021, making it more difficult for buyers to get approved for a mortgage, but it hasn’t corrected real estate prices yet. While the stress test now requires all borrowers to qualify for their mortgage payments at 5.25% (up from 4.79%), established homeowners motivated to buy can still use the equity in
their homes. It’s the first-time buyers who struggle the most. “We see a lot of parents helping their adult children get into the market,” says Rina.
“Without the financial help, most first-time homebuyers are effectively shut out of the market.”
And, where first-time homebuyers were once able to buy in the suburbs, they are now looking even further into rural areas or sacrificing space for more affordable condo living.
Real estate experts advise getting into the market if they can, despite the adversity first-time homebuyers face. Prices will only continue to climb, even if they climb more slowly.
“The most realistic advice I can give to first-time homebuyers is don’t wait on the sidelines for prices to drop because historically, they haven’t,” explains Jordan. “If you want into the market, you may need to adjust your expectations and location as well as ensure you don’t buy more than you can afford, but you should get out there and do it.”
