After a slowdown earlier in the year, real estate is seemingly on the rise, if only slightly. According to the Canadian Real Estate Association (CREA), there was an increase in the number of homes sold in September. This is the second month in a row where sales have increased month-over-month. However, when you look at sales year-over-year, there was an 11 per cent decline. Notably, home sales in the Greater Toronto Area were down 35 per cent in September compared to this time last year.
Despite the overall sales decline, prices continue to slowly rise. The national average price for homes sold in September was just over $487,000 – a 2.8 per cent increase in comparison to last year.
This price increase was led by Vancouver and Toronto, where the average selling prices were $1,046,982 and $775,546 respectively. However, if you remove those two markets from equation, the national average drops down to $374,500.
Recent interest rate hike had no affect… yet
In case you missed it, the Bank of Canada announced another interest rate increase of 25 basis points on Sept. 6. The overnight rate now sits at one per cent. Although another rate increase was somewhat expected, it was a bit surprising that it came so soon, considering there was an increase in July as well.
The July increase was possibly responsible in part for the dip in sales over the summer. And while potential buyers may be on the watch for how this increase will affect the market, they’ll likely have to wait a few more weeks to see.
The rate increase was announced at the beginning of September, but it is unlikely it would have affected the recent sales numbers as most buyers would have likely already locked in their rates with a pre-approval.
Personally, I don’t believe we will face another rate hike anytime soon, but in the event of such, it’s safe to say another rate increase could price more Canadians out of the housing market.
Though sales numbers have gone down, the demand for real estate still seems to be thriving, and the number of listed homes has increased nationally. Following three consecutive monthly declines, the number of newly listed homes rebounded by almost five per cent in September, mainly due to a jump in new supply in the GTA.
Canadians willing to overspend for housing
In the face of rising home prices, it seems most Canadian home buyers are willing to overshoot their budget. According to a new home buyer survey from TD, 56 per cent of respondents would be willing to go over their budget by up to $50,000.
Ironically, 57 per cent of homeowners surveyed said they were confident about what they could afford, yet 97 per cent admitted they wish they had factored in other costs associated with owning a home before purchasing.
When budgeting for a home, it’s important for potential homeowners to look at more than just the monthly mortgage payment, and take other expenses into account such as property taxes and maintenance fees. These costs can drastically change how much one can actually afford.
The TD survey also found that those surveyed were worried about rising interest rates (58 per cent), hidden costs of home ownership (50 per cent), being house poor (49 per cent), and the ability to afford monthly mortgage payments (30 per cent).
Indeed, there are worries about affordability and rising interest rates, and housing prices have yet to fall in any significant manner. But keep in mind that the September results are a very small sample size and we’re yet to see notable variances in the market – if any – due to recent rate hikes.