Home Prices In Canada Are On The Decline As Rates Hit New Highs Last Month
Home prices in Canada have seen a record dip in 2022 while interest rates are continually on an upward spiral which forced a market adjustment that is still ongoing. According to the Canadian Real Estate Association , the benchmark rate was down 1.6 per cent in December at CAD 730,600, which brought the overall decline since the peak in February to 13.2 per cent. This has been the biggest high-to-low fall since 2005 when the group started compiling this data. The situation was the same last year which saw the most significant price decline in a year since 2005 at a 7.5 per cent overall drop. As the Canadian economy stares at a possible recession in the time to come and as Bank of Canada has warned of future rate hikes to counter inflation, the brunt may be seen in the housing market in the time to come.
Amidst such a scenario, house buyers have used floating-rate debt for purchases during the real estate boom during the pandemic. All these borrowers may face immense pressure if the mortgage costs continue to be high. Job losses due to economic slowdown may also put a strain on people who have to make monthly mortgage payments to continue to stay in their homes. The recession may hit in Canada during the first half of the year as predicted by economists. “As we look ahead to the crucial spring selling season, the all-important question is who will emerge from hibernation in greater force — buyers or sellers?” Douglas Porter, the chief economist at the Bank of Montreal, said in a note to clients commenting on the new sales data. “We suspect that the market will still be digesting the rapid run-up in interest rates and that buyers will be more reluctant to re-emerge, keeping prices under pressure for some time yet.”
Until now, the pullback which has led to the housing slump is due to buyers being unable to afford the high-interest rates. It could also be attributed to the seasonal changes as the listings do record a slump in Canadian winters and tend to pick up during Springtime, which is a busy time for sellers.
If you have recently bought a home or are thinking of buying one and are concerned about any mortgage issues, do not hesitate to contact us at LendX Financial in Brampton, Greater Toronto Area.