After this weeks interest rate hike how are people feeling about their mortgages and more generally home prices? I came across the below graphic which suggests we are still early innings of a price correction. It’s worth noting that the creator is notoriously bearish - but it’s not hard to picture more pressure on pricing especially in areas (GTA/Van) where previous buyers completely ignored valuation and affordability and bid against each other to move prices to peak levels (early 2022). [Hot Tip: Never pay over ASK] As always - location matters and each province and area will be influenced by their own factors. But are previous sales prices even relevant any more? Speaking to someone at one of Canada’s big real estate developers this week he sees ‘SALES’ bottoming sooner than later - but agrees PRICES may still come under pressure. From the listings/transactions I’ve seen there is a lot of ‘inventory’, days on market keep getting longer and I still see ASK prices too high for what I would consider reasonable (in TO/Downtown). Rates are currently forecast to continue to move higher (0.5% to 1%?) in the coming years. Higher taxes, utilities and other maintenance costs all impact affordability further. Will new buyers continue to wait for more affordable prices? Is the better decision to rent for longer (and let saving grow in investment accounts)? Will sellers lower prices further and give up their gains or take a loss? Will governments be able to improve supply and/or boost demand? Real estate can be a great way to build wealth - but it’s not the only way. It will be interesting to see how the rest of this cycle plays out. 🤔 Feel free to drop your comments and perspectives. 🙏👍 Perspective ≠ Prediction
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17 Comments
Ed
@edsam · 4h
You can debate about the amplitude but the longwave guy is not wrong. Demographics, immigration and financialization have turned real estate unattainable for the young. Average age of first time buyers is now over 40. This is bad news for family formation. The real estate bubble has sucked in a lot of otherwise productive capital. Unfortunately young people vote less. Boomers and politicians will protect the status quo. Price will probably grind sideways for a long time.
Le Corb@lecorb · 5h
Real estate is heavily affected by demographics. With projected lower immigration and boomers moving out of their homes, and hopefully more homes being built, it’s clear there is substantially less pressure on demand. Rising interest rates is highly likely given Canada now has the lowest rate in the world amongst developed nations. Only a matter of time our rates clock upwards. Inflation is not hitting housing nearly as much as consumer staples and imports. It’s my personal opinion that housing prices still have more room to reduce, and condo prices in particular. With a slowdown in the Canadian economy this only reduces buyers when economic prospects are lower. I thankfully sold my leisure property earlier this year and my parents home as well. Timing is everything. If one can afford it, over the next while, real estate prices are beginning to be a bargain and now as low as before Covid. It could become even more attractive. But anyone buying now is buying on the right side of price history.
Clantosa
@clantosa · 5h
I think prices are still too high for the most part. I too see houses sitting on market longterm and the ones that do finally sell are the ones offering the best value. Recently renovated in good areas No one wants to buy a hunk of junk that's been ignored for years at these prices. Hell some houses I see around you'd actually have to pay me to buy it from you. That's how terrible the conditions are. It'll cost me more to knock it down than it's even worth
Michael Noël
@therev · 2h
Lots of cheap housing in New Brunswick. A lot of great jobs if you have the right education - nurse, teacher, doctor, all trades.
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