So, Where do we stand now?
A lot can happen in a month! Since our last update, we’ve seen major shifts take place in the housing market – as tides have turned things from a seller’s market into a stable market. Some would even say the buyer is gaining some presence in the real estate transaction. Interest rates continue to rise, meaning that home affordability is still out of reach for many first-time buyers despite housing prices beginning to ease. So how are new homeowners adapting? Read on to find out.
Intergenerational Transfer of Wealth
While surging housing costs have made things difficult for new buyers over the past two years, for those who own property, the subsequent increase in home value has provided more equity than ever before. So how are millennials coming up with down payments at a time when median house prices are soaring up close to $800,000?
They are asking mom & dad.
For those fortunate enough to come from families who own property(ies), asking for help has become the new norm. A recent report from CIBC found that at least 30% of first-time homebuyers in Canada received help from family members to put together their down payments.
How much help?
Back in 2015, the average amount of a gift for housing (usually from the buyer’s parents) was around $52,000. Fast forward to last year, and findings show an increase all the way up to $82,000. This sheds some light on how single people and young families are breaking their way into a difficult housing market. Accumulatively that makes up approx. $10 billion in gifted down payments accounting for 10% of all down payments.
Rebalancing in the Housing Market
The effects of the recent series of Bank of Canada rate hikes are already being seen throughout Ontario with the new homebuyer being priced out of the market. For April, Toronto noted a decline in sales of approximately 41% compared to last April, as published by the Toronto Regional Real Estate Board. The overall price of houses in the area dropped month over month as well by around $100,000.
North of the GTA, Collingwood and other Georgian Bay and Huron Shores communities did experience a cooling in sales as well, but not nearly as pronounced. From March to April, home sales declined by 11.6% While still in an overall state of growth compared to last year, that growth seems to be slowing down abruptly. The average price of homes in the area also dropped back down under the 1 million mark.
Does that make it a bad time to sell?
While not as tipped in the seller’s favour, the current housing market is still very profitable for those looking to make a move. Just be prepared to start welcoming back standard conditions like financing, inspections and other features that make the process more reasonable for buyers. House prices are still higher than pre-pandemic; however, RBC reported in their May 16th newsletter “We think the sizable drop-in activity in April marks a turning point for the Canadian market with further cooling on the way.
The End of Housing Supply Issues?
While we have seen supply begin to meet demand, on a national level, there is another factor at play that needs to be considered – immigration & migration. The number of permanent residents that Canada is prepared to bring in has increased and this will continue to put pressure on the housing supply chain. The 2022 Canadian Govt objective is over 430,000 new immigrants and with Ukraine Refugees added in this number could get to 500k.
This isn’t necessarily negative, though, as the resuming of immigration to Canada will help make up for the mass exodus of workers that have not resumed their positions post-pandemic. The people that Canada looks to approve into the country bring with them skills, education, and work ethic – something that will help the country find economic stability in the months to come.
The end of lockdowns is likely to slow the migration of Canadians who moved well out of the GTA over the past two years. As normal summer activities resume and city life awakens, the pressure to escape the urban jungle will likely lessen, easing the buying competition in more rural communities.
STAY IN THE KNOW
In an ever-changing market, it’s key to have experience on your side. Buckley Mortgage Broker acts not only as a home finance provider but as an educator of our clients. We equip our clients with the knowledge they need to confidently enter the market. To learn more about what we can do for you, call, or reach out now.
