The prolonged dip that has been the defining characteristic for Canadian Real Estate over the last nearly 8 months continues unabated with news that 2023’s January was the worst January for home sales across the country in 14 years. Are fewer buyers putting homes on the market due to the prospect of not getting what they think they could or should be getting for them? Yes, that’s true, but what about increased demand meeting less supply to counter that in the way it should? Then there’s the factor of there being fewer home starts too.
All sorts of different factors have gone into what we are seeing now with regards to this drastic decline in the number of homes being sold. The other end of the spectrum has to be looked at too, as with interest rates being way up from this time last year there are going to be fewer buyers willing to make a move, even if they might well still be approved for the mortgage. And looking at the headline in greater detail, is this type of decline being seen in both Toronto and Vancouver regions too where relativity has to be a consideration given the way these markets have so much demand pushing sales ALL the time.
One thing that is certain with a downturn in homes sales is that some realtors will be feeling that pinch more than others. Fewer prospective homebuyers clients are going to be out there, so if you’re one of those realtors having more difficulty than usual with drumming up new clientele then our online real estate lead generation system here at Real Estate Leads is definitely something you will want to consider.
Back to topic, let’s look more into what’s fuelled this drastic downturn in sales that has made January 2023 such a noteworthy one for the fewest amount of sales in January since 2009.
Downs Countering Ups
Canada as-a-whole home sales for January 2023 were also down 37.1% compared to January 0222. This is as January sales also fell on a month-over-month basis, going down 3% compared with December and in large part neutralizing the small gains made in December. City-specific gains in Hamilton-Burlington, Ont., and Quebec City were more than offset by lower sales in Greater Vancouver, Victoria / Vancouver Island, Calgary, Edmonton and Montreal.
Fewer sellers of course means fewer options for buyers and properties in Greater Toronto Area suburbs like Mississauga and Ajax are still seeing multiple offers and buyers putting in bids that are above asking price. This of course goes hand in hand with many owners who believe that market has tanked and so selling our property right now isn’t in our best remunerative interests.
Following home sales tumbling last year as rising mortgage rates increased the cost of borrowing for Canadians and slowed the housing market, a lot of sellers are in waiting and watching to see when median home prices go back up and the market starts offering the same types of returns on homes that it was for many years up until the Spring of 2022.
All of this countered somewhat by the fact that newly listed homes were up 3.3% on a month-over-month basis in January. Homes can certainly be listed and not sell though, and the reasons for why that might be would be an entire blog entry of its own. But the reason that’s especially notable in the here and now is supply continues to be very low.
New housing supply in January was the lowest level for that month since the year 2000. What we are seeing is buyers are not finding the houses that they would like to buy, and then they’re not qualifying for the mortgages on the housing they would like to buy.
Correction Mode Continues
It is fair to say the housing market is still in correction mode, but that correction is by and large complete and in all likelihood median home values are not going to fall that much further. It’s also worth noting that these depressed levels haven’t resulted in a wholesale sway over to a pronounced buyer’s market, and the belief is that the more ‘balanced’ one that should be the reality when the dust settles is probably the most beneficial scenario for all.
In terms of prices, the bottom is likely still a ways away, and probably at best around summer time and maybe a little bit later with the market still adjusting to higher interest rates. January’s sales-to-new-listings moving back to 50.7% along with the actual national average home price being $612,204 in January ( -18.3% from January 2022) is in line with that way of thinking regarding the correction still being incomplete.
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