A Return to ‘Normal’?
The State of Real Estate in 2022
Last year was one for the real estate history books. The pandemic helped usher in a buying frenzy that led to a record number of home sales and a historically-high rate of appreciation, as prices soared by a national average of 19.9% year over year.
There were signs in the second quarter that the red-hot housing market was beginning to simmer down. But home prices and sales volume ticked up again in the fall, leading the Royal Bank of Canada to speculate: “Canada’s housing market run has more in the tank.”
So what’s ahead for the Canadian real estate market in 2022? Here’s where industry experts predict the market is headed in the coming year.
MORTGAGE RATES WILL CREEP UP
The Bank of Canada has signalled that it plans to begin raising interest rates in the “middle quarters” of this year. What does that mean for mortgage rates? Expect higher variable rates to come. And since September, fixed mortgage rates have also been climbing. Fortunately, economists believe the housing sector is well-positioned to absorb these higher interest rates.
What does it mean for you? Low mortgage rates can reduce your monthly payment, make it easier to qualify for a mortgage, and make homeownership more affordable. Fortunately, there’s still time to take advantage of historically-low rates. We’d be happy to connect you with a trusted lending professional in our network.
VOLUME OF SALES WILL DECREASE
A record number of homes were sold in Canada last year. The Canadian Real Estate Association estimates that 656,300 home purchases took place, which is an 18.8% increase over 2020. So it’s no surprise that the pace of sales would eventually slow. The association predicts that, nationally, the number of home sales will fall by 12.1% in 2022, which would still make 2022 the second-best year on record. It attributes this relative slowdown to affordability challenges and a lack of inventory but expects sales volume to remain high by historical standards.
What does it mean for you? The frenzied market we experienced last year required a drop-everything commitment from many of our clients, so a slower pace of sales should be a welcome relief. However, buyers should still be prepared to compete for the best properties. We can help you craft a compelling offer without compromising your best interests.
THE MARKET WILL BECOME MORE BALANCED
In 2021, fears about the virus and a shift to remote work triggered a huge uptick in demand. At the same time, many homeowners delayed their plans to sell, and supply and labour shortages hindered new construction. This led to an extreme market imbalance that benefitted sellers and frustrated buyers. The Royal Bank of Canada expects to see demand soften gradually this year as rising prices and interest rates push the cost of homeownership out of reach for many would-be buyers. And an above-average supply of new homes should be coming on the market.
What does it mean for you? If you struggled to buy a home last year, increased supply and softening demand could make it easier to finally secure the home of your dreams. And if you’re a seller, it’s still a great time to cash out your big equity gains! Reach out for a free consultation so we can discuss your specific needs and goals.
HOME PRICES LIKELY TO KEEP CLIMBING, BUT AT A SLOWER PACE
Nationwide, home prices rose an average of 19.9% in 2021, but the rate of appreciation is expected to slow down in 2022. The Canadian Real Estate Association forecasts that the national average home price will increase by 5.6% this year. However, some experts caution against a “wait and see” mentality for buyers. “Affordability is unlikely to improve [this] year as prices should march higher, even as interest rates creep upwards as well,” Rishi Sondhi, an economist at TD Economics, told Reuters.”
What does it mean for you? If you’re a buyer who has been waiting on the sidelines for home prices to drop, you may be out of luck. The good news is that decreased competition means more choice and less likelihood of a bidding war. We can help you get the most for your money in today’s market.
WE’RE HERE TO GUIDE YOU
While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. We can guide you through the ins and outs of our market and the local issues that are likely to drive home values in your particular neighbourhood.If you’re considering buying or selling a home in 2022, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.