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.
Lynn Fee from Keller Williams Complete Realty in Grimsby explains, “Supply and demand changes give the impression the market is softening, but that’s not the case. Inventory is increasing, so bidding wars have slowed down, but prices are still high, and it’s still a sellers’ market.”
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. “I wish I had a crystal ball,” Lynn laughs. “But the reality is this is a market that changes weekly. It’s tough to predict what will happen next, but it appears we’re heading into a more balanced 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. Those buying are looking for recently renovated homes, or ones with pools, and are willing to pay top dollar.
“Buyers know that renovations are costly, and the wait time to hire a contractor or put in a pool can be up to two years,” explains Sarit Zalter from RE/MAX Escarpment Realty in Ancaster. “Buyers want a home that doesn’t require any renovations, and they are more educated about what’s out there.”
She says that while the market is still high and vibrant, it is becoming more sensitive and specific. “A few months ago, you could sell high no matter where you lived, but now people are more selective about the location.”
Another factor that may be impacting the market is that homeowners who bought 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. “Rising interest rates make monthly payments difficult for families renewing mortgages,” says Lynn. “We may see an influx of homes purchased in 2017.”
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 found they were going back to the city to socialize and work once restrictions were lifted. As Sarit explains, “this type of buyer wanted more house for their money but didn’t embrace their new community, so now, they want to move back to the city a few years later.”
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.
