The end of the hot fall real estate market season is fast approaching, and the cool holiday season is staring us right in the face. If you have been following the real estate market at all, you know that prices have been skyrocketing throughout the Greater Toronto Area. Many have been watching the market carefully and wondering when Toronto can expect a correction.
A 2021 market recap
The COVID-19 pandemic only proved to heighten already existing trends. More first-time homebuyers are in the market, on the hunt for the perfect place to live while existing property owners have hunkered down, waiting for conditions to change. This has created a lack of inventory in a market with extreme demand.
Sale volumes tend to decrease throughout the holidays as sellers and buyers choose to stay put through the season. We expect to see fewer listings come to the market over the next two months, however, they will pick back up in the new year.
Data from the Canadian Real Estate Association (CREA) shows that the average home price rose 19.9% to $680,000 in 2021, reflecting the imbalance of supply and demand. Buyers are staring at even higher prices in the coming year, with price growth predicted to continue to go up, however at a slower pace. CREA predicts that the national house price will go up by 5.8%, reaching a record high of $718,000 in 2022.
Amidst rising prices, buyers are becoming increasingly concerned about what will happen if and when a market correction takes place. Affordability has been stretched and with tighter mortgage stress tests, access to finance is getting more difficult. These conditions will ultimately lead to a peak in the market, followed by a correction.
What happens when the bubble bursts?
Many potential buyers are biding their time, waiting for prices to plateau as they perceive current price growth as an element of risk. Racialistically, at a certain point there are only two options for this market: either income goes up, or prices have to drop. When Canada’s central bank lifts interest rates, which could happen ahead of schedule, it will make it even more challenging for buyers to access finance.
But let’s take a look at what would happen in an instance of an extreme market correction of 50%. In the case of Toronto single family home prices, this would mean that prices would only return to where they were in 2014.
Is a 50% correction anticipated? Nope.
While a market correction is likely to be looming in the distant future, its possibility shouldn’t be cause for buyers to hold off on making purchases.
If you’re on the hunt for a property in the Halton Region, it’s best not to wait for prices to only continue to go up. Get in touch to start your home buying journey today!