Highlights of recent news
- Homes selling for more than the asking price continues to trend
- Mortgage stress test tightened in June
- Canadian home sales continued to cool in July down 3.5% from the previous month
- Shortage on supply continues to keep the market in favor of the Seller
- Canada Mortgage and Housing Corp. makes changes to the underwriting practice of mortgage loan insurance
- Realtors continue to list homes lower than current market prices as a way of advertising, with the knowledge the market is a Seller’s market which will result in a much higher ultimate sale price
Since the beginning of 2021, there have been lots of news and fluctuations in the market. Many may wonder how the changes may affect the future months of house and condo purchases. In this article, we will dive into recent news and analyze how this could potentially affect the near future.
The year started with an upheave in sales from 2020 when the pandemic first began. In March, however, sales began to decline. Although the sales were still higher than they were for the same quarter of the previous year. There has been lots of competition in the market causing a shortage in supply. The shortage of supply while demand is still high in comparison, has caused prices to continue to rise. It could be said that due to lack of available homes for purchase could be a reflection as to why the number of homes sold has steadily decreased in passing months.
Additionally, during this period where the market is a seller’s market, it has been noted that houses are selling way above the asking price. As sellers and realtors alike are aware that with any property there will be multiple offers placed on it, many are using low advertised selling prices to gain attention and momentum on the properties as an advertising method. In return, this has caused an uptick in bidding wars resulting in the final price much higher than the asking price. Perhaps this could also be a reason behind why sales have dropped since the beginning of 2021.
In June 2021, the OSFI made changes to the mortgage stress test affecting the average buyer’s affordability budget. This could also be the source behind why sales continue to drop through the summer months. With the mortgage stress test reducing the budget each bank would deem affordable based on the applicant’s debt to income ratio, many buyers are either unable to afford a home amongst intense bidding wars or are perhaps unsatisfied with the homes that remain in their affordability budget.
Bank of Canada announced in September that they will be holding the unprecedented low target interest rate of 0.25% at least until 2022, to help encourage buying while the economy recovers from the pandemic.
It appears that all of these factors have caused buyers to hesitate before committing to purchase a home. Some may be looking upon the current election to see if the winning party will have any weight on the housing market. Each party’s leaders have addressed the critical housing market and the need for Canadians to have accessible, affordable housing and other options. However, it’s unclear when and, if any changes will make an impact on the current housing market. While vaccination rates increase, tourism and immigrant numbers begin to rise which will increase the number of people seeking housing for residential or investment purposes. It is projected that house prices will continue to rise, while supply remains insufficient in comparison with buyers. Based on the past news and current trends, it seems unlikely for housing prices to decline while demand surges any time soon.
Disclaimer: This article is based on reviewing local news articles and is our own speculation. This is not professional advice.