Real estate industry experts have been telling us all that a market correction was inevitable based on the factors leading to meteoric home price raises that have been seen over the past 4+ years. That is on top of less-intense rises that have been occurring for much longer than that, and with ultimate reality of it all being that home ownership is moving out of reach for increasing numbers of people. There is fallout of all different sorts when something like this happens in a market, and especially one that is the reflection of a very basic human need for a roof over your head.
So the current market correction is a good thing in as far as more people being able to afford homes, but the flip side of that sees people who bought homes sometime in the last few years and may now be carrying a mortgage on a home that is worth quite a bit less than what they paid for it. You may not be ‘underwater’ in the same sense if that home is in a desirable location like Vancouver or Toronto, but for others it’s going to be a concern. There’s also homes that might have gone on the market when prices were higher that are going to now be rented out until the market cycle swings the other way again.
The last part of that won’t sound good to anyone who works in real estate, but to that end our online real estate lead generation system here at Real Estate Leads is an effective means of giving realtors a leg up on the competition when it comes to obtaining new clientele. That may be something that’s more needed than ever, and it has long been known as an especially good investment for agents who are new to the business.
Moving back onto topic, let’s look at the recent predictions coming out that are suggesting that housing market price declines are expected to continue dropping. Not just to the end of this year, but that they’ll be continuing to drop right through 2023 too.
15%? Underestimate
The forecast we’re referring to has the average home price in Canada declining by nearly 25% by the end of 2023. And that type of a decline is remarkable for sure considering it was only in February earlier this year when the peak was reached. This would signify a real accent on the ongoing housing market correction, and a sharp one at that. Especially when you consider that multiple reputable sources had their estimate as an approximately 15% drop that was to occur.
The reasons the drop is foreseen to be even bigger now is because of weaker housing data and changes to monetary policy that have gone much further than previously anticipated. With interest rate hikes from the BoC being front and centre there. In July the bank raised its key interest rate by a full percentage point in July, making it more expensive to borrow the money buyers need to have mortgages on the homes they’ve purchased. Further increases are expected this year, and that’s a big part of why these predictions are the way they are.
4% Drop Month-to-Month
We see as well that housing prices have dropped by more than 4% each month since February, at a time when then national average home price set a record by reaching $816,720. We’re also seeing that prices are still expected to be above the pre-pandemic level at the end of 2023, and the prediction is that the largest price corrections are going to occur in Atlantic Canada and PEI, Nova Scotia, and New Brunswick in particular.
We can also expect the upcoming economic slowdown working to ease inflationary pressures to the extent that the Bank of Canada may begin reversing interest rate hikes, and this will help allay some of the fears of those who have the most to lose if median home prices decline too far.
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