Are Housing Markets Settling into a New Normal?

Headlines are meant to be dramatic. But let’s take a wider look and see where we are today, compared to where we’ve come from.

Record-shattering real estate market statistics of recent times have been in some ways an anomaly, fueled by low-interest rates and pandemic-era market constrictions. As first-round pandemic restrictions eased, pent-up buyer demand created an almost frantic market with bidding wars
driving prices to new records and creating a lot of buyer frustration.

Where we got to …

According to CREA, home sales activity was up by 256% on a year-over-year basis in April 2021 reflecting the chasm between the best April ever in 2021 and the worst ever in April 2020. The national average home price was a little under $696,000 in April 2021 , up 41 .9% from April 2020 when the average price of a home was $488,000.

By April 2022, the national average home price was a little over $746,000, up 7.4% from the same month last year. Looking month-to-month, home prices in Canada peaked at a record high of more than $816,000 in February this year but even with prices up year-over-year, as of April the average home prices have seen declines for two months in a row.

Where we are …

Interest rates are going up and look to keep going up to push inflation down from almost 7%. With the Bank of Canada’s recent hike, the Key Rate now sits at 1.5%. That’s still below where it was pre-pandemic when inflation hovered around 2%.

Every market is different. However, forecasters seem to agree that when May statistics are released, we’ll likely see further month-to-month and year-over-year softening of home prices and sales volumes. That shouldn’t be a surprise. Markets have looked “way up” or “way down” depending on which parts of the past years are used as the snapshot for comparison. Yes, the coming months will likely reveal more “dramatic” statistics.

As housing markets swing back to a more normal rhythm and the frenzy dissipates, let’s keep an eye on longer-term trend lines before declaring that the sky is falling. Interested to know where your property fits into this changed and changing landscape? Let’s talk.