On a summer night, a few weeks after college graduation, a group of upper-middle-class friends gathered for a small get-together. One of them uttered, “We’ll never own a house in the city.” This outlook was met with begrudging agreement.
That was 1986.
Needless to say, many things have changed since then — and huge numbers of home purchases have been made by a considerable number of people in and around the city since then. But, several decades later, that sobering statement remains relatively unchanged for would-be homeowners.
And it’s not just homes. Apartments, condominiums, cottages, and essentially any type of shelter nowadays are marked by skyrocketing real estate prices. But again, this is nothing new. Real estate has always been one of the most crucial investments in life. Expensive, yes; but still a necessity.
Home Is Where the Rates Are
According to realtors, a dizzying real estate market sent buyers scrambling to take advantage of borrowing rates. With that in mind, the expression “location, location, location” continues to echo in our heads. For the third consecutive year, Vancouver was PwC Canada’s top market to watch. However, every region within Canada comes with its own setbacks as well as its breakthroughs.
In their report, Emerging Trends in Real Estate 2022, PwC Canada found the best bets in the nation’s real estate market were rental housing, warehousing and fulfillment, and uses related to life sciences and healthcare.
Although numbers might vary, the National Association of Realtors predicts housing prices will rise by almost six per cent in 2022. Realtor.com, however, feels it will likely be around nine per cent. Some markets might even see prices fall.
Approximately a year ago, economists predicted that 2022 would be an easier time for homebuyers. A year later, little has changed. While economists certainly expected prices to keep rising in 2022, they point to 2021 as the probable peak of the housing-market frenzy.
In the U.S., many feel the housing market should finally return to normal in 2023. Prices, however, will likely remain high. It is expected that year-over-year home inflation will hit its pre-COVID average by early 2023, but prices will continue to skyrocket—at a historic rate— throughout 2022.
The Federal Home Loan Mortgage Corporation (nicknamed Freddie Mac) reported, “The pace of home sales has cooled since the first quarter of 2021, when it was at 7.2 million.” Their prediction for 2021 and 2022 is that home sales will also reach 6.8 million. And though they forecast a house price growth of about 17 per cent in 2021, Freddie Mac feels that house price growth will slow to seven per cent in 2022.
Mapping the Market
Although home prices in today’s real estate market are at a historic high, supply is at a historic low. Amidst all this, however, homes continue to be purchased at an astoundingly high rate. The following trends mark the market’s environment— and may help you successfully navigate its jagged geography.
- Increasing number of homeowners: The need for stability, combined with lower interest rates, has led to a steep rise in homeownership desires, a trend expected to continue into the next few years.
- The great suburban migration: Chief among those homeownership wishes is an ongoing migration to the more affordable, spacious suburbs. The popularity of remote work, coupled with millennials’ desire to buy or rent single-family residences, could cause developers to build more housing in the suburbs — particularly, two-, three-, and four-bedroom apartments instead of studios and one-bedrooms.
- Desperately seeking spaciousness: As the world inches towards some semblance of normalcy, an increasing number of people share a much sought-after longing— liveable space. To gain more indoor and outdoor space attached to their unit, a growing number of residents are moving into single-family rental properties.
- Pivoting towards agile workplaces: Another result of the pandemic is that flexible and agile workplaces are becoming the new normal. Many tenants are looking for shorter leases and scalable, managed spaces.
- Ever-expanding rates: From rising interest rates to increasing inflation rates, the Federal Reserves’ decision on the inflation rate will artificially suppress interest rates on real estate debt. However, rates are sure to rise and return to more historic levels.
- Principal residences and heavier taxation: While heavier taxation for principal residences seems inevitable, it’s also likely that this will be met with a rise in the Canadian real estate market prices, due to immigration, increased job opportunities, and low interest rates.
- Growing number of defaults: Although experts feel we won’t see a repeat of mass foreclosures like those of The Great Recession, the number of defaults and homes in foreclosure is expected to double from where it stood prior to the pandemic.
Summer of 2022: Give Me Shelter
No matter where you’re reading this (whether it be in a sizzling city or simply chilling at the cottage) take full advantage of the summer days and nights because we all know that the ever-fluctuating real estate market can bring an unwelcome winter’s chill faster than expected.
Across the country, the real estate market continues to intrigue, regardless of the location.
Inventory is rebounding.
Demand is cooling.
Prices for popular homes are falling.
But as positive as this outlook is, buyers will need to shop harder than ever to locate real estate bargains. All we can do, both literally and figuratively, is dress appropriately.
That’s not a forecast; that’s a real estate reality check.
Peter Campbell | Contributing Writer
