Who could have imagined a global pandemic would cause such a rise in housing demand and prices? But here we are over two years later, and after a brief pause in activity during the first lockdown in 2020, house prices have been rising ever since. A mass exodus from Toronto condos and homes to more rural spaces coupled with record low interest rates established a trend that has continued into 2022.
After two years of bidding wars and overinflated prices, the market finally seems to be poised for some sort of correction. But what does that mean? Is the market softening? Our real estate experts say no, there’s no need to push the panic button. The market is simply shifting and adjusting after two years of turmoil.
The Toronto Regional Real Estate Board (TRREB) explains that after explosive growth in the first quarter, the second half of 2022 should see “a more moderate pace of price growth” due to rising interest rates and a slight increase in inventory.
Alex Irish from Alex Irish & Associates in Oakville explains, “The market is adjusting and becoming more balanced. It’s been skewed for sellers and made it very difficult for buyers, but now we’re seeing a market that favours both buyers and sellers.” Alex reminds us that spring is typically a busy selling season. The grass is green, pools are open, and homes look more attractive than in winter.
Despite new restrictions on foreign buyers and interest rates on the rise, it’s not enough to get people worried. Some buyers may be holding off, but many more are anxiously diving in now that they can compete.
“Buyers are always optimistic that prices will drop,” says Alex. “They recognize a great opportunity as listings increase, and many have been waiting a long time to break into the market.” While homes in desirable neighbourhoods are still going into multiple bids, sellers are no longer listing low and hoping to get well over asking.
“Buyers are fatigued from the competition and many put purchasing a home on the back burner,” explains Michael Brejnik from Royal LePage Burloak Real Estate Services in Burlington. “Stabilizing prices mean fewer bidding wars and a more traditional market, so buyers are looking again.”
Michael explains that there are now fewer listings with offer dates, which means homes have to be priced more accurately, rather than the practice which had become common of underpricing and holding offers on a specific date. This scenario gives buyers more confidence and the ability to negotiate, something they haven’t been able to do in two years.
Another factor that may be impacting the market is that homeowners who bought in 2017 when interest rates were very low now have mortgages coming up for renewal, and they may find that they can’t afford the new payments. Some are looking for homes with rental apartments to create a source of income to help offset mortgage payments. Or they are forced to downsize or move out of the area.
In other cases, buyers who were pre-approved at lower interest rates a few months ago now have 60-90 days left before their paperwork expires and they need to find something quickly.
And then there are the buyers who left Toronto at the start of the pandemic and moved to the outskirts but now find they are going back to the city to socialize and work once restrictions were lifted. “People realize they’re ok sharing common areas again, so some are heading back to the city,” says Michael.
Overall, the market is in flux, and multiple factors continue to affect buying and selling decisions. It’s too soon to make solid predictions, but all indications point to a more balanced market which is good news for buyers and sellers.
