If the real estate market is cooling, how low can it go?

Dated: May 9 2022

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The Greater Toronto Hamilton/Burlington Area's rising real estate prices have gotten a lot of attention because they are among the highest in the country. We've all been wondering how far they can go for a long time.

According to the REALTORS® Association of Hamilton & Burlington, home prices in the RAHB market area were down 5.6 percent from the previous month (March vs April) but up 18.2 percent from April 2021.

What is causing the current shift?

The gradual increase in interest rates by the Bank of Canada has had the most significant impact. Borrowing rates, such as mortgages, rise when interest rates rise. Higher mortgage rates imply higher monthly mortgage payments, and fewer buyers (especially first-time buyers) may be unable to afford the high asking prices.

But how far will it go?

Most people will admit that it is not easy to say. According to one expert, RBC economist Robert Hogue, prices in Canada will grow by only 8.3 percent in 2022, compared to 18.5 percent in 2021, and will fall by about 2 percent in 2023.

What does this mean? 

Home prices in Burlington and the GTHA have been considered unaffordable for a long time, and even in the worst-case scenario, if home prices drop 20-40%, the market will remain where it was before the pandemic. Though a drop in home prices may attract new first-time home buyers, it may also result in a more significant economic fallout, such as a housing crash, which no one wants!

The all-too-familiar narrative that the market is about to crash never gets old in real estate. As home prices rise, those already in the market are ecstatic, while those still renting may feel like they've missed out. 

So when it comes to timing the real estate market, is waiting for the market to crash a sound investment strategy? The short answer: No! There has never been a point in time where the Great Toronto Hamilton/Burlington Area home prices have come down and not gone back up higher than they were before, even if it takes a few years.

Should I buy or sell now? 

When you buy a home, you're making the assumption that owning it in 10-20 years will be worth more than not owning it at all. So, if you're looking to time the real estate market by waiting for the Greater Toronto Hamilton/Burlington Area housing market to crash, you will be disappointed.

When people ask me when the best time to buy or invest in real estate, I tell them the best time to buy is five years ago. It doesn’t do you any favours to wait or try to time the market by waiting. The idea is to buy when you’re ready.

If you're thinking about buying, now is the time to meet with a local lender, go over your finances and affordability figures, and lock in your interest rates for the Spring market. Even if you hear about home prices falling marginally, keep in mind that interest rates heavily influence your monthly mortgage payment.

This year could be the year to maximize the value of your house in the Greater Toronto Hamilton/Burlington area. Even though we have seen slight price decreases, we are still in a seller's market, with more buyers than sellers. Although it looks like we are moving away from the "HOT" market of 2021, one month of data is insufficient to establish a pattern.

While an attempt at timing the market isn’t the best real estate strategy, working with the right realtor is. They are your number one advocate and can guide you towards the best opportunities available to you when you decide the time is right.

My best advice is to contact an agent as soon as possible. I begin working with my customers up to a year before their big move. I enjoy arming my clients with the information and resources to make informed real estate decisions.

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Rebecca Keddy

When I was researching a career in real estate I talked with a lot of local professionals. I realized that my skills in training, coaching and client services were a great match for real estate. I d....

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