New numbers from the Canadian Real Estate Association confirm what buyers, sellers and owners have known for a while: the housing market is in trouble.
The group representing more than 155,000 Realtors nationwide said in a release Friday that sales for September were down more than 30 percent compared to the same period a year ago.
Prices are also down on an annual basis, with the average sale price of a home listed on the MLS system coming in at $640,479. That’s down 6.6 percent from a year ago, and down more than 21 percent from the all-time high of $816,720 reached in February.
That was before the Bank of Canada began its aggressive campaign of rate hikes to curb runaway inflation. The central bank has raised its benchmark lending rate by more than three percentage points over the past six months, pushing rates on variable rate loans above five and even six percent.
That’s what poured cold water on the once red-hot housing market.
“The most important thing to remember is that we are still in the middle of a period of rapid adjustment, with buyers and sellers trying to get a feel for each other while many people have had to bring their home search plans back to the drawing board,” CREA chief economist Shaun Cathcart said in a release.
“Therefore, resale markets may remain on the quiet side for some time yet, with even more pressure on rental markets due to that coin flip.”
Rental market is hot
That’s the case in many markets across the country, including Brampton, Ont., where realtor Shaun Ghulam said he’s noticed an interesting dichotomy: the ownership market has cooled, but the competition for rentals is hot red.
“Lease prices are now ridiculous,” he said in an interview. “If it’s $3,000 a month, people are coming in for $3,500.”
That uncertainty in the rental market is one reason Earl Hypolite and Naomi Zitt-James say they want to buy a home of their own, sooner rather than later. The couple rents an apartment in downtown Toronto, but with a seven-month-old baby and a large dog, they feel it’s time to make the leap.
“When it was just the two of us, I think it was very attractive,” Zitt-James said of the rental.
“But now to have that amount of money … to go into renting instead of paying off something that we have, it’s a little more unattractive than when we first moved in.”
While there are no imminent plans to buy, they are looking at properties outside the city, where prices have fallen sharply.
“I’m feeling much better now that I know the prices have dropped a bit,” said Zitt-James. “I feel a little sad for the people who went in and got those houses just to get it down.”
Realtor Ghulam said sales prices in Brampton have dropped significantly since the spring. Sellers are still looking for prices they might have gotten six months ago, and when they don’t get any offers, they tear down their home and try again at a lower price, hoping to spark a bidding war which rarely comes.
“Check how many times the property is listed,” said Ghulam. “If it is listed for four or five times, you know that the seller is not serious about selling and that they are just playing.”
The result is a wide gap between the seller’s expectations and the buyers’ expectations. “Sellers are holding back, they are waiting to see where the interest rates go,” he said. “Buyers are a little hesitant because they want to wait until the prices fall more.”
TD Bank economist James Orlando says the numbers show that recent rate hikes have taken a lot of momentum out of the market, putting off buyers but also potential sellers.
“Listings fell for the third straight month, indicating that a slowing economy and higher interest rates are yet to significantly increase supply,” he said of the numbers. “If anything, soft price conditions are keeping potential sellers on the fence.”