Will Home Prices Continue to Drop?

By: Michelle Poirier

Will Home Prices Continue to Drop?

Tags: Toronto Housing Market Report, Toronto Home Prices, Price drop

 

I hope you are having a great summer!

September 7th Interest Rate Announcement:

As we near the end of the season and get ready for the fall real estate market, one thing that’s on everyone’s mind is the upcoming Bank of Canada interest rate announcement scheduled for Sept. 7th. Economists from major banks are expecting Bank of Canada Governor Tiff Macklem to announce an additional 0.75% rate hike, raising the overnight lending rate to from 2.5% to 3.25%. 

https://storeys.com/bank-of-canada-tiff-macklem-more-rate-hikes/
https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/

It will be interesting to see how quickly the real estate market reacts to this new rate. Will prices drop even further? Maybe a little? Will buyers see this as close enough to “the bottom" and start looking for deals? Or will they continue to sit and watch from the sidelines? It's going be very interesting for sure!

Some sellers holding out:
It's likely that the fall market will be slower than usual because many sellers are going to try and wait it out. However, the sellers that do list this fall will be very motivated to sell because they need to move. Buyers who are ready to jump back into the market will find themselves in a more balanced (possibly buyer's) market with less competition, with the luxury of including a financing or home inspection clause in their offers. I am not alone in welcoming these new market conditions.

Higher interest rates wiping out savings:
While prices are much lower than February 2022, higher interest rates are causing mortgage payments to be just as high – nullifying most of the savings for people who need to borrow. Fortunately with lower home prices buyers will need less down payment, making entering the market a little easier (less savings required).

Why comparing today’s prices to February sales is flawed:
The Toronto market has seen a fair amount of correction since the peak in February, pretty much wiping out all the gains we saw earlier in the year. While it is common to think “wow, the market is really going down”, we have only lost the gains from a market that was “off the rails” due to an extended period of government stimulus and historically low interest rates. Add to this the fact that BOC may have miscalculated inflation (see National Bank special report) and waited a little too long to begin raising interest rates. Just imagine, if BOC had started raising interest rates 3 months sooner - February’s peak might not have been so severe. 
https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/special-report_220722.pdf

Complementary Market Analysis for Buyers and Sellers:
There’s a lot of housing market data being quoted in the news on a daily basis. Always keep in mind that market performance varies greatly both geographically (all over the GTA), and also by housing type. If you would like to know more about a particular market segment I am here to help. I can break down all the data so you can see accurately what’s happening in your area, giving you a clear picture to base future buying/selling decisions on. Contact me by email mpoirierrealtor@gmail.com with any questions you may have or call me directly (416) 984-6660.