With the official start of fall next week, we are already seeing some changes in real estate markets across the country. Following a record-breaking year in 2021, the 2022 housing market across the country is recalibrating after seeing its fair share of ups and downs. As we look towards the end of the year, here are the four market predictions our real estate experts have their eyes on.
Detached Home Price Drops will Mimic Price Gains
As the real estate market adjusts to the receding pandemic, we expect that areas that saw rapid and unprecedented appreciation during the pandemic will experience similar levels of price decreases as we return to balanced market conditions. Some areas, including smaller cities and towns outside of the usual city centre hot spots, experienced an outsized share of price gain during the pandemic. For example, according to the Kitchener Waterloo Association of REALTORS, the average sale price of all residential properties sold in February 2021 increased by 32.1% compared to the same month the previous year. The Kitchener-Waterloo region also saw five consistent months of record-breaking home sales from November 2020 to March 2021, with the majority of properties sold being detached homes.
It was a similar story for many other cities surrounding the Greater Toronto Area (GTA). According to the Toronto Regional Real Estate Board, in Oshawa, the average price of a detached home in February of this year hit a staggering $1,218,317. In August, just six months later, the price dropped 29.79% to $855,400.
Interest Rates are Top of Mind
Last week, the Bank of Canada announced its fifth interest rate hike of the year. It also cautioned that Canadians can expect at least one more rate increase in 2022. Some buyers and sellers have decided to stay on the sidelines and wait out the interest rate increases before entering the market again. This has impacted inventory across the country, although we have seen increases in some markets and property types, such as condominiums in the GTA. In a recent summer survey of Zoocasa readers and clients, 35.8% said that the interest rate hikes have negatively impacted their interest in the real estate market. Once the interest rate hikes are confirmed to be complete, we may see more of the people that are currently on the sidelines test the waters and re-enter markets across the country.
Seeing a Truce in the Tug-of-War Between Buyers and Sellers
As the market began to recalibrate in early spring, there was a definite push and pull from sellers that expected February 2022 prices, and buyers that feared overpaying. This fall, we expect to see more motivated sellers in the market. These are the sellers that want to move on from their existing property to downsize, purchase a home with more space, or are moving to a different city. This is great news for motivated buyers that may have already sold a property and need to purchase a new one or those hoping to pay significantly less than February’s peak prices. “At the beginning of the year, we saw a lot of fear-based trends. Buyers and sellers alike had the fear of missing out, but also of overpaying,” explains Lauren Haw, CEO and Broker of Record at Zoocasa. “Now, buyers are experiencing more negotiating power and motivated sellers are adapting to the more recent market conditions”.
Luxury and Higher-Priced Property Sales Will Continue to be Low
Month-over-month, we’ve seen fewer listings over the $2 million price point sell or even hit the market. The limited inventory is driving down many markets’ overall sales volume and price point averages, including luxury markets and those that are typically higher-priced. Some higher-end homeowners may have the time and flexibility to wait out the market until the prices of their biggest asset settle. “It’s not just that luxury listings aren’t selling, but we’re seeing less of them hit the market each month,” said Haw. “As the market continues to recover, we can expect that the value of luxury listings will too. At that point, we may see more listings over the $2 million price point again.”