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Grim Outlook for Canadian Housing Market: Impact of Interest Rates, Inflation, Supply & Demand on Affordability

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Grim outlook for the Canadian Housing Market!

Today we will talk about the Grim outlook for the Canadian Housing Market, including how increasing interest rates, inflation, and both supply & demand paint a grim picture for the Canadian housing market.

Real Estate transactions involve two parties, the seller and the buyer. The price of a house goes higher when there are more potential buyers than houses available. And when there are more houses on the market than there are people actively searching to buy them, the market typically shifts into a buyer’s market. That means sellers will have to lower their prices if they want their homes sold quickly. So it’s not just about interest rates, but also about supply and demand, which is a broader view.

According to a recent report by the National Association of Realtors, the number of buyers who can afford a median-priced home has declined substantially over the past year. 

In reality, rising interest rates are a key factor in the current affordability situation. The cost of borrowing money also rises as interest rates rise, making it more difficult for buyers to finance a property. as first-time home buyers who are already having a difficult time saving money for a down payment.

As of September 2022, the market opinion on the mortgage rate projection in Canada is for the Central Bank to increase mortgage interest rates by an additional 0.75% in 2022, from 3.25% to a record of 4.00%. Moreover, mortgage rates have risen, and housing prices have been rising faster than earnings. At the same time, affordability has become more difficult with increased interest rates and lower home prices. These trends will continue until there is a shift in demand or supply.

Is the housing market stable in Canada?

Since there is a gap between interest rate changes and their impact on inflation, and the outlook is very unclear, higher rates are felt immensely, but it takes longer for interest rates to bring down price growth on things that aren’t directly connected to borrowing. However, getting inflation back to 2% could take some time, and there could be hiccups along the road that lead to downturns and a housing market collapse. That’s why prices will continue to fall in Canada.

People are having a tougher time affording a home due to rising costs and mortgage rates, as well as slow income growth. Low interest rates are less of an incentive for people to buy homes. Even those who were able to afford a house with low interest rates before the Bank of Canada’s recent rate hikes may be reconsidering buying now that they will have to pay higher interest rates on their mortgages.

Has the Canadian housing market peaked?

Even though home prices are going down, it is getting harder for Canadians to buy a home. This is likely to keep going on.

The average mortgage payment in Canada is $61 more than it was last year. The average mortgage payment in Canada has gone up. In the second quarter of 2022, monthly commitments went up by 4.5%, to $1,458 per month.

In the last few weeks, the market has seen multiple offers that haven’t happened since home sales reached a peak in February 2022. This is because buyers are rushing to make a deal before their pre-mortgage approvals run out, and for the Bank of Canada to increase interest rates once again.

There is a sense of urgency among buyers to close on a home before their pre-approval expires and before interest rates start to rise considerably again in December 2022, in order to take advantage of the interest rates they locked in months ago. The Bank of Canada has cautioned that, in order to fight high inflation, it will have to raise interest rates even more.

According to the Canadian Real Estate Association, inventory levels in key Canadian real estate markets have been declining over the past decade, with July active listings running below the 10-year average. As demand keeps exceeding supply, prices are rising as a result of a shortage. 

A recent report from RBC Economics says that the growth in newcomers and the development of new homes will likely make the inventory shortage worse, especially in the big cities of Vancouver and Toronto.

The housing market currently shows indicators of high demand and low supply. As a result, housing prices have risen, making it more challenging for first-time home buyers to enter the market. It is difficult to foresee the future due to the current political and economic climate.

However, for some people, waiting might not be an option. It’s only going to grow hotter in the market, which means price increases and possibly higher interest rates. Buyers who wait too long may find themselves priced out of the market entirely.

The decision to buy a home in any market is very personal. Due to the fact that homes represent the largest investment most people will make in their lifetimes.

The best way to buy a house is not to try to time the market or guess what might happen next year. Instead, you consider buy a home based on your budget and what you need. If you find a home you like in a neighborhood you like and it’s in your price range, it may be a good fit for you.

The affordability of housing has dropped to historic lows!

The challenge of affordable housing has existed for some time. It is created by the disparity between housing demand and supply. The demand for homes continues to rise, while the supply cannot keep pace. This has resulted in an increase in housing costs.

Inflation, high mortgage rates, and record-high home prices undermine the affordability of housing. I also do not anticipate a decline in housing values in the near future. Earnings are not keeping pace with rising costs and affordability will continue to be a problem if we do nothing.

The rising cost of housing is a serious problem. More affordable units should be built, and builders should be incentivized to increase supply, to solve the problem.

If you have been considering Buying, Selling, or Renting your home or have avoided the notion due to a negative experience, let Arsh Syed, a Real Estate Agent in Toronto, manage the deal.

His experience and understanding have been indispensable. He desires Toronto’s housing crisis to improve. He wants to establish relationships and spread the word about his exceptional service, increasing the likelihood that renters and property owners would place their faith in him.

Arsh wants property owners to know that by hiring him, they are drastically reducing risks, saving time and saving money.

For further information about his services, please visit or contact (416) 844-2217


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