"I think the market's going to pop open again"
Sales figures in Canada’s housing market may have made somewhat grim reading for January – but there are growing signs that there’s light at the end of the tunnel, according to a prominent real estate executive.
While January saw the lowest number of home sales across Canada for that month since 2009, Christopher Alexander (pictured), president at RE/MAX Canada, told Canadian Mortgage Professional that he envisaged an uptick in the market around the spring as buyers begin to move off the sidelines and take confidence from a calmer borrowing environment than before.
“If I was to make a prediction, I think the market’s going to pop open again sometime around late April, early May. I think consumers have adjusted to the new reality,” he said.
“People have been on the sidelines for far too long, and I think if you’re a situational transactor – you got married or you’re having a kid, or you had another kid or you’re getting a divorce, you’re going to need to make a move and those situations you can’t wait forever on.”
Increasing numbers of Canadians entering the housing market could have a ripple effect, Alexander said, that will lead more people to step into the fray, with limited supply also set to help bring about a “very competitive” marketplace.
National home sales were down by 3% on a month-over-month basis in January and 37.1% yearly, according to the Canadian Real Estate Association, although Alexander said RE/MAX had been getting reports across the country of multiple offers on properties and offer dates for listings.
While there’s still some trepidation in the market about the prospect of a recession and lingering inflation, Alexander added that the possibility of no further rate hikes by Canada’s central bank for the foreseeable future had injected confidence in some buyers.
The MLS® Home Price Index was down 1.9% on a month-over-month basis in January 2023. It now sits about 15% below its peak level in February 2022 👉 https://t.co/b9pj3qILHc #CREAStats pic.twitter.com/8JElif5QfL
— CREA | ACI (@CREA_ACI) February 15, 2023
“The Bank of Canada has announced they’re going to put the brakes on rate increases for a while, and I think that’s going to give people the confidence boost they need to get back into the market,” he said.
How big a problem is the lack of new listings in Canada’s housing market?
The number of newly listed properties was up by 3.3% on a month-over-month basis in January, but new listings are still at record lows across the country. In fact, new inventory fell to its lowest level for January last month since 2000, according to CREA.
The market saw 4.3 months of inventory available across Canada at the end of January, CREA said – near its pre-pandemic level, and almost a month lower than its long-term average (about five months).
Alexander has previously sounded a strong note of warning on the supply crisis imperilling Canada’s housing market – but current low levels of inventory are unlikely to reverse anytime soon, he said, because of the dramatic dip in home prices that’s taken place over the past year in many markets.
“Normally when inventory is really low, you get prices push up a lot,” he said. “But there are just so many negative headlines that sellers are thinking, ‘There’s no way I’m going to get 2021 prices,’ and so they’re waiting. Plus, they have nowhere to go.
“So until there’s a break, and full-on consumer confidence is restored, I think it could be a tight inventory situation for the foreseeable future.”
Will home prices start rising again?
While the rising-rate environment has pushed up borrowing rates for scores of homeowners, the projection that a growing number could be compelled to place their property on the market because they can no longer afford their monthly payments still hasn’t borne out.
That’s a trend that’s also keeping inventory low – and that in the long run, is likely to see house prices start ticking upwards again, according to Alexander.
“What’s so fascinating is [despite] all the doom and gloom around the rising rates, and ‘we’re going to have serious carnage because people can’t afford their mortgages’ – that has not materialized yet,” he said. “And these predictions keep being pushed out.
“And so I’m really curious to see: these inventory numbers are shockingly, staggeringly low. And that’s going to keep prices at least where they are, and probably push them up.”
What are your thoughts on the start to the year for Canada’s mortgage and housing markets? Let us know in the comments section below.
