2022 has been quite a rollercoaster of a year.
In Q1, we saw home values surge almost 30% year over year in values. With historical low-interest rates and the demand for housing was the main driving force. Inflation was rising fast and the Bank of Canada (BOC) started increasing the interest rates. Mortgage rates were at 2.7%, 4 rate hikes later, and we are now at 4.7%.
Q2 Property values have now settled back down to reality and we might see the average price come down some more with the most recent rate hike on July 13th with a full 1% increase. Seasonal market also typically slows down in the summer months so it will be interesting to see how the market is responding to the latest hike. In June, prices are still 5.3% higher than June 2021.
The market is shifting and different opportunities are arising in this market that didn’t seem possible when the market was hot. This reminds me of 2018 when they first introduced the stress test, which made every buyer qualify 2% higher than their mortgage interest rate.
This ultimately slashed buyers’ budgets and what happened was the higher-end properties took the biggest hit and condos surged. The GTA has a shortage of housing supply and people need a place to live. So whether they buy a bigger property or a smaller property, or even push buyers out of the market and into the rental market, we need to look at the opportunities as the market presents them.
This is a great time to upsize better than when the market was hot. If you’re buying and selling in the same market, you’ll be just fine.
Here’s the opportunity:
- In February, the average detached home was $1,921,283. In June, the average detached home was $1,605,497, a drop of $315,786 or -16.43%.
- If you’re in a townhome, the average price in February was $1,289,680 and in June, the average price was $1,092,741, a drop of $196,939 or -15.27%. If you upsize now, compared to the peak in February, you will be saving an average of $118,847.
- Not only are you saving over $100k by upsizing now, you also won’t be competing against other buyers and you’ll have all the time to negotiate, do your due diligence, ensure the house is inspected and you’re financially protected before jumping in.
Keep in mind the 3 main fundamentals that affect the real estate market are: interest rates, unemployment rate and immigration.
Unemployment rate remains historically low while we are still in short supply of labour, and we are welcoming a record number of new immigrants to Canada. Over the next few months, we will be bringing in over 500k newcomers, permanent residents, international students as well as temporary workers.
We are seeing the impact of the increase in housing demand in the rental market as most newcomers will rent in the first few years before buying. These fundamentals tell us that there is demand and while the buyers are sitting on the sidelines to see what happens, there is a window of opportunity for you to upsize before the buyers come back into the market, at a discount.
I had a chat with a mortgage specialist about the recent 1% rate hike and how this might impact the market going forward, take a look below.
If you want to know how much your house is worth and want to see if upsizing is a possibility for you, contact me to explore your options before this opportunity passes you by.
📲 647-504-0690
📧 steven@mistersauga.ca