Across Canada, homes sales are historically high, and even as winter recedes and spring is upon us, the figures from the last few months are pointing to a strong start to the year with momentum to keep going.
“The question is: will that [spring] supply [of resale homes listings] be overwhelmed by demand as it was last spring, or will we start to see the re-emergence of some of the many would-be sellers who have been hunkered down for the last two years? Either way, it is shaping up to be another interesting year for the housing market,” Cliff Stevenson, Chair of the Canadian Real Estate Association said in a February news release.
Just like in the new construction sector, there is a low supply of resale homes on the market. The number of newly-listed properties dropped 11 percent from December 2021 to January 2022, according to the real estate association’s figures.
Buying a Resale Home in Canada’s Big Cities
There was an even split between the number of local markets where sales were up and those where sales were down in January. A look across Canada’s biggest cities shows where people are finding resale homes to purchase. Sales were up in Calgary, Greater Vancouver, and Ottawa but down in Winnipeg, Montreal, the Fraser Valley, and Hamilton-Burlington.
The actual number of transactions in January 2022 came in 10.7 percent below the record for that month, set in 2021. That said, as was the case throughout the second half of 2021, it was still the second-highest level on record for that month.
Additionally, the number of newly listed homes dropped by 11 percent month-over-month in January, with a pullback in the GTA accounting for more than half of the national decline.
“The ideal situation between now and the summer would be that a huge surge of sellers come forward looking to sell in the spring 2022 market,” said Shaun Cathcart, Canadian Real Estate Association’s Senior Economist.
“If that were to occur, similar to 2021, we’d likely see a massive number of sales take place which would get a lot of frustrated buyers into homeownership, and we’d likely see some cooling off on the price growth side if those offers are spread across more listings. Those are all things this market needs. It really comes down to how many properties come up for sale in the months ahead.”
Resale Home Prices in the Greater Toronto Area
The resale home market in the Greater Toronto Area is defined by supply and demand.
A lack of new listings of resale homes continues and that means more competition for the homes that are for sale, which drives prices up. The average home price crept up nearly 28 percent when compared with last year in the GTA, according to the Toronto Regional Real Estate Board.
The average selling price for a home in the region surpassed $1.3 million in February 2022, up from just above $1 million last February and more than $1.2 million in January of this year.
Looking at home size and style, the average price of a detached home hit more than $1.7 million last month in the GTA, with semi-detached properties at $1.3 million, townhouses at $1.1 million, and condos nearing $800,000.
The GTA continues to be a desirable place to live and buy a home, however, the demand is outpacing supply, fueling a market where bidding wars, few sellers, and a frenzied atmosphere have become the norm.
Could the Interest Rate Increase have a Cooling Effect?
In early March, the Bank of Canada increased its benchmark interest rate to 0.5 percent from 0.25, where it has sat for the last two years of the worldwide pandemic. Read our blog post here to learn more about what the interest rate increase means to you if you’re an investor, a first-time home buyer, an upsizer, or a downsizer.
The sustained low-interest rate is an incentive for many people to get into the housing market, as well as upsize, but there remains a supply issue in major centers like the GTA, which impacts pricing.
The Toronto Regional Real Estate Board reacted to the interest rate increase by stating that it will likely have a “moderating effect” on home sales, but will be countered by substantial immigration levels and a continued lack of supply. The Board does not see home prices abating in the near term.
“Because inventory remains exceptionally low, it will take some time for the pace of price growth to slow,” Jason Mercer, the board’s chief market analyst, said in a news release.
“Look for a more moderate pace of price growth in the second half of 2022 as higher borrowing costs result in some households putting their home purchase on hold temporarily as they resituate themselves in the market.”
Greater Toronto Area realtors reported 9,097 sales through the Toronto Regional Real Estate Board’s MLS® System in February 2022, representing a 16.8 percent decrease in the number of sales compared to February 2021.
The supply of listings for low-rise home types including detached, semi-detached and townhouses was also down year-over-year. In the condominium apartment segment, particularly in Toronto, new listings were up in comparison to February 2021.
“We have seen a slight balancing in the market so far this year, with sales dipping more than new listings. However, because inventory remains exceptionally low, it will take some time for the pace of price growth to slow,” said Mercer.
If interest rates rise again throughout this year and next, resale home buyers could experience less competition, and in turn, slightly lower sales figures in the second half of 2022. That is if the market cools as expected due to higher borrowing costs.