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2023 Real Estate Market Outlook (And What It Means for You)

2023 Real Estate Market Outlook (And What It Means for You)

Last year, one factor drove the real estate market more than any other: rising mortgage rates.

 

In March 2022, the Bank of Canada began a series of interest rate hikes in an effort to pump the brakes on inflation.1 And while some market sectors have been slow to respond, the housing market has reacted accordingly.

 

Both demand and home prices have softened, as the primary challenge for buyers has shifted from availability to affordability. And although this higher-mortgage rate environment has been a painful adjustment for many Canadians, it should ultimately lead to a more stable and sustainable real estate market.

 

So what can we expect in 2023? Will mortgage rates continue to climb? Could home prices come crashing down? While no one can forecast the future with certainty, here’s what several industry experts predict will happen to the Canadian housing market in the coming year.

 

 

MORTGAGE RATES WILL EVENTUALLY STOP CLIMBING

 

Over the course of 2022, we saw the benchmark rate rise at a record pace—a whopping 400 basis points in just nine months. Fortunately, there are signs that the central bank’s series of rate hikes may be coming to an end.2

 

After last month’s half-point rate increase, Bank of Canada officials struck a noncommittal tone about future rate hikes, prompting economists to speculate that the central bank may pause hiking rates by early spring, if not sooner.3

 

According to Stephen Brown, a senior economist at Capital Economics, the central bank is likely to hike rates at least one more time before it shifts gears. “We would not rule out a final 25 basis point interest rate hike in January,” said Brown in a client note. “But the Bank is very close to the end of its tightening cycle.”3

 

What impact will this have on mortgage rates? Variable mortgage rates could finally stabilize. However, buyers hoping for a big drop later in the year may be disappointed. Although some market analysts are betting on lower rates, CIBC economist Benjamin Tal thinks that’s unlikely as long as inflation remains a factor. “I think that the Bank of Canada is determined to make sure that they will not touch interest rates in terms of cutting them before inflation is totally dead,” said Tal in an interview with Canadian Mortgage Professional.4

 

Fixed mortgage rates, on the other hand, could continue to trend lower as bond yields crumble.5 James Laird, co-CEO of Ratehub.ca, predicts that Bank of Canada’s benchmark rate will hold steady through 2023, but fixed mortgage rates may tick down because of bonds. “Bond yields will decrease throughout the year, allowing fixed rates to follow suit,” said Laird in an interview with Canadian Mortgage Professional.6 However, those rate decreases may be fairly muted as long as banks’ borrowing costs stay higher overall.

 

It’s also possible that rates on both variable and fixed-rate mortgages will climb instead. Bank of Canada Governor Tiff Macklem has made clear that the central bank is prepared to keep hiking rates aggressively if inflation fails to dissipate. “If high inflation sticks, much higher interest rates will be required to restore price stability,” said Macklem in a recent speech to business leaders.7

 

What does it mean for you?  While no one can predict the future of mortgage rates with certainty, an end to interest rate hikes could bring some much-needed relief for borrowers. If you have plans to buy a home or renew your mortgage in the coming year, you’ll want to weigh your options carefully when deciding between a variable or fixed rate. Reach out for a referral to a mortgage professional who can help.

 

 

BUYERS WILL RETURN TO THE MARKET

 

The pace of home sales fell steeply last year as higher mortgage rates priced would-be buyers out of the market. However, some industry experts predict that the Canadian housing market is poised to turn a corner.

 

Although many buyers and sellers are currently in a stalemate over housing prices, market dynamics may shift this spring as more homes go up for sale.

 

“Zooming in on demand and supply conditions, the drop in unit sales has been the steepest on record, but the pace of the decline is starting to slow,” write CIBC economists, Benjamin Tal and Katherine Judge, in a recent forecast.8 Douglas Porter, chief economist at BMO Capital Markets, projects that existing home sales will fall through the first half of 2023 and then reverse course and begin to rise in Q3.9

 

Victor Tran, mortgage expert at Ratesdotca, also speculates that a stabilization in mortgage rates will bring home buyers back out. He told the Financial Post in a December interview: “We may be seeing the bottom of the housing market trough before buyers begin to enter the market in spring of 2023.”10

 

Buyers’ purchasing power will still be constrained by higher mortgage rates, though, as well as by a stringent mortgage stress test for uninsured mortgages and a hefty monthly payment for insured ones. So a buyer’s ability to participate in the market will depend, in part, on a seller’s willingness to negotiate.

 

What does it mean for you?  If you’re a buyer who has been waiting for conditions to normalize, now may be an ideal time to start your home search. As more buyers begin to enter the market, you’ll face steeper competition and reduced negotiating power.

And if you’ve delayed selling your home, this could be the year to make a move. Reach out to schedule a free consultation and home value assessment with the JP Realty Team

 

 

HOME PRICES WILL STABILIZE LATER THIS YEAR

 

Canadian home prices have fallen roughly 10% from their peak, and analysts expect they could fall further before moderating in the second half of this year.11

 

A Reuters poll of industry experts found a wide range of predictions. But on average, the analysts surveyed project that home prices could fall another 7.5% or so. However, the majority report that the risk of a market crash is low.11

 

A nationwide housing shortage is expected to prop up prices even as sales volume falls. According to Robert Kavcic, senior economist at BMO Capital Markets, “We have a unique situation where demand has cracked and buyers can’t qualify for, or afford, early-year prices. But, outside some areas, there’s not a bounty of listings to choose from, and sellers are still able to say ‘no thanks.’”11

 

Economists at CIBC speculate that home prices will hit a floor in the coming months: “A lower 5-year rate and pent-up demand amplified by demographics will work to establish a bottom in prices by the spring of 2023,” write Benjamin Tal and Katherine Judge.8

 

RBC Assistant Chief Economist Robert Hogue offers a similar projection: “We expect prices will keep falling until a bottom [this] spring. Our forecast calls for the national benchmark price to drop 14% from (quarterly) peak to trough.”12

 

What does it mean for you?  It can feel scary to buy a home when there’s uncertainty in the market. However, real estate is a long-term investment that has been shown to appreciate over time. And keep in mind that the best bargains are often found in a slower market, like the one we’re experiencing right now. Contact us to discuss your goals and budget. We can help you make an informed decision about the right time to buy.

 

And if you’re planning to sell this year, you’ll want to chart your path carefully to maximize your profits. Contact us for recommendations and to find out your home’s market value.

 

 

RENT PRICES WILL CONTINUE TO CLIMB

 

While home prices have fallen, rent prices have surged—rising around 12% year-over-year, according to data from Rentals.ca.13

 

The average monthly cost to rent a home in Canada is now higher than ever and some analysts are growing increasingly concerned that renters won’t be able to keep up with the higher payments. “We’re getting close to a point where rents are just simply becoming unaffordable for renters,” said Urbanation president, Shaun Hildebrand, to CBC News.14

 

But that’s not stopping landlords from collecting higher rents. In 2023, affordability challenges for would-be buyers, inflationary pressures, and an overall lack of housing are expected to continue driving up rent prices in much of the country.

 

“Interest rates are actually working to elevate rent inflation because many people are not buying, so they are renting more,” CIBC Economist Benjamin Tal told CBC News.13

 

And according to Tal, the higher rates have also disincentivized builders and developers from investing in rental properties. That, in turn, has exacerbated the undersupply of available units.13

 

It’s possible rent prices could ease if Canada’s economy deteriorates, says Urbanation’s Hildebrand. “But over the medium and longer term with aggressive immigration targets and rental construction that’s been stalling recently due to high costs, it’s pretty clear that rents are going to continue to rise higher.”14

 

What does it mean for you?  Rent prices are expected to keep climbing. But you can lock in a set mortgage payment and build long-term wealth by putting that money toward a home purchase instead. Reach out for a free consultation to discuss your options.

 

 

WE’RE HERE TO GUIDE YOU

 

While national real estate forecasts can provide a “big picture” outlook, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the issues most likely to impact sales and drive home values in your particular neighbourhood.

 

If you’re considering buying or selling a home in 2023, contact us JP Realty Team now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.

 

 

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

 

Sources:

  1. CP24 News –
    https://www.cp24.com/news/the-bank-of-canada-has-raised-rates-again-here-s-a-timeline-of-how-we-got-here-1.6125268#
  2. Reuters –
    https://www.reuters.com/markets/bank-canada-set-hike-rates-may-signal-it-is-near-end-tightening-cycle-2022-12-07/
  3. CBC –
    https://www.cbc.ca/news/business/bank-of-canada-1.6677004
  4. Canadian Mortgage Professional – https://www.mpamag.com/ca/mortgage-industry/market-updates/bank-of-canada-could-be-done-on-hikes-for-now-cibcs-tal/430005
  5. Reuters – https://www.reuters.com/business/finance/bank-canadas-inflation-fight-made-harder-bond-yields-fall-2022-12-15/
  6. Canadian Mortgage Professional – https://www.mpamag.com/ca/news/general/whats-the-bank-of-canada-rate-likely-to-be-in-2023/430755
  7. Global News –
    https://globalnews.ca/news/9341825/bank-of-canada-tiff-macklem-speech-dec-12/
  8. CIBC Capital Markets –
    https://economics.cibccm.com/cds?id=6f402711-69b3-46a5-afc8-91ede34fe1fd&flag=E
  9. BMO Capital Markets –
    https://economics.bmo.com/media/filer_public/04/01/040155ce-0cb2-49ac-b63e-def8e66d4c05/outlookcanada.pdf
  10. Financial Post –
    https://financialpost.com/real-estate/mortgage-rates-soar-higher-interest-rate-increase
  11. Financial Post –
    https://financialpost.com/real-estate/canada-house-prices-to-tumble
  12. RBC Special Housing Reports –
    https://thoughtleadership.rbc.com/quiet-fall-housing-market-across-canada/
  13. CBC News –
    https://www.cbc.ca/news/business/rent-inflation-november-1.6650777
  14. CBC News –
    https://www.cbc.ca/news/canada/toronto/rental-costs-canada-1.6685602

 

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Let us refer you to a trusted mortgage pro to outline your best options.

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Contact us to find out what your home could sell for in today’s market.

Posted by Christine Pecharich in Blog Posts, Burlington, Georgetown, Guelph, Halton Hills, Milton, Mississauga, Oakville
Home for the Holidays: How to Stretch Your Budget in a Season of Inflation

Home for the Holidays: How to Stretch Your Budget in a Season of Inflation

You don’t have to break the bank to celebrate the holidays in style—even in this season of inflation. Prices may be higher on everything from food to gifts to decorations, but there are still plenty of opportunities to eke out extra savings.

For example, you can trim your energy bills by up to 20% just by sealing air leaks in your home.1 Other small fixes—such as swapping old light bulbs for LEDs and plugging electronics into a power-strip—can boost your yearly savings enough to pay off some of your holiday budget.

And thanks to a pandemic-era boom in online shopping, it is easier than ever to find deals on new and pre-owned furniture, thrifted gifts, DIY decor, and more. Even secondhand stalwarts like Goodwill have joined the digital fray, making it a cinch to score gently-used treasures at extra-low prices.2

You won’t be the only one bargain-hunting your way to a more financially-stable New Year. Multiple surveys have found that inflation is not only chilling people’s spending, it’s also prompting shoppers to search for better deals and creative ways to reduce their bills.3

Here are some strategies you can use to boost your holiday budget by trimming household expenses:

 

  1. Hunt for Deals on Groceries

If you’re finding it harder than it used to be to serve your family dinner on a budget, you’re not alone. With grocery prices rising at a record pace, many families are struggling to control costs on food staples, such as meat, dairy, produce, and grains.4

That’s made pulling off holiday gatherings especially stressful lately. But don’t despair: Even with inflation, retailers are still giving motivated shoppers plenty of opportunities to whittle down their bills.

The key is to pay attention to the cost of each item on your shopping list—not just the most expensive—and look for easy swaps and discounts. For example, try buying non-perishable items in bulk, especially when they’re on sale, and only in-season produce. Or trade name-brand goods for less expensive options from a store’s private label. As you tap into your inner bargain hunter, you could be surprised by what you save when you’re more mindful of your selections.

And unlike in the old days, you no longer have to clip your way through paper flyers to snag a bargain. Instead, you can save both time and money by scouting for deals online, digitally clipping coupons, and earning cash back through special apps and browsers. For example, coupon aggregation sites, like Flipp, and shopping apps—such as Checkout 51 and Rakuten—make it easy to score discounts and cash back on a variety of purchases, including groceries.

Also, check to see if your neighbourhood grocer posts their weekly flyers online or if Save.ca has published flyers from other nearby stores. If you’re hosting a holiday party, the markdowns you find can help you narrow your food and recipe choices, based on what’s currently on sale.

 

  1.  Prep Your Home for Holiday Guests With Pre-Owned Finds

You don’t have to sacrifice style for the sake of preserving your holiday budget either. If you’re expecting company this year and would like to add some festive flair to your home, you can do so inexpensively—especially if you’re willing to decorate with items that are secondhand.

Thrifting is back in vogue, with an increasing number of shoppers preferring pre-owned furniture and home goods. The number of Canadians who shop secondhand has grown.5 In fact, one study found that nearly three-quarters of Canadians now buy pre-owned goods of some type. 6 Plus, buying used isn’t just a great way to save money, it also helps the environment by keeping reusable items out of landfills.

Fortunately, it’s become easier to score secondhand deals online. For example, you can scout consumer marketplaces on Facebook and Kijiji. Or you can take advantage of neighbourhood freecycles and “Buy Nothing” groups. And a number of thrift shops now have e-commerce sites, including major chains, like Goodwill.

If you’re handy with a paintbrush or have some basic carpentry skills, you can also modernize some of your existing furniture by upcycling it yourself. Or, if you enjoy crafting, search through your own recycling or sewing bin for raw material to make one-of-a-kind decorations.

Don’t stress yourself out, though, if you don’t have the time or money to dress your home the way you hoped. Your house can still feel festive and inviting, even if it’s not completely done up.

 

  1. Forgo Major Renovations in Favor of DIY Home Improvements

Holidays are always a tricky time to undergo big renovations. But with ongoing worker and material shortages, now is an especially bad time to commit. Inflated costs can add thousands to your reno budget—and unnecessary stress to your holiday.

Instead of suffering through an ill-timed remodel, you’re better off saving this time of year for simpler, less expensive projects you can do yourself.

One winter-perfect upgrade to consider: Build a DIY fire pit so that you and your guests can roast marshmallows and relax in the cozy comfort of your backyard. You can also add some extra ambiance by hanging energy-efficient LED outdoor string lights that change from white to colourful. These are festive enough for the holidays, but also versatile enough to use year-round.

Or, if you’d rather curl up by an indoor fire, channel your DIY energy into a fireplace upgrade. Adding a wooden beam to the top of your mantel can add an extra layer of coziness. Alternatively, re-tiling or painting your fireplace surround can lend contemporary flair.

Just be sure to stick to DIY projects that you know you can do a quality job on—especially if your changes will be difficult to reverse. Feel free to reach out for a free assessment to find out how your planned renovations could impact your home’s resale value.

 

  1. Invest in Home Maintenance Projects That Cut Your Utility Bills

You can save money by completing basic home maintenance tasks, such as swapping your furnace filter and updating your lightbulbs. But if you really want to lower your bills this winter, consider projects that make your home more energy efficient.

Research by the trade group NAIMA found that most homes in Canada are under-insulated, which wastes energy and money.7 The group estimates that Canadians can potentially save hundreds of dollars per year just by retrofitting their homes. Luckily, there are plenty of DIY insulation projects that you can complete in just a few days. For example, some projects you can do relatively quickly include:

  • Insulating your attic or basement crawl space
  • Weatherstripping doors and windows
  • Sealing areas around the house that may be leaking air, including electrical outlets and fireplaces

The savings you get from these projects can really add up. Natural Resources Canada estimates that walls alone account for roughly 20% of heat loss in homes, so they’re a rich target for tackling costly sources of air leakage.8 And thanks to the Canada Greener Homes Initiative, you can also save a bundle this year by investing in certain energy-efficient upgrades and claiming a tax rebate.9 Be sure to check with us about any municipal or provincial rebates and incentives that may be available, too, before getting started on a project.

 

  1. Use Expense Tracking to Boost Your Holiday Budget

To avoid overextending yourself during the holidays, one of the best things you can do is track your income and expenses. If your monthly budget is usually tight, you may need to make some adjustments to free up cash for holiday expenditures.

For example, here’s a sample budget worksheet that we created. Start by adding in your expenses: Under the “Typical” column, you can list your standard expenses, and under the “Adjusted” column, list any areas where you could cut back on spending.

Then consider how your standard wages may be adjusted this month by extra shifts, additional tips, or an end-of-year bonus. By decreasing your spending and/or increasing your income, you can build room in your budget for holiday gifts and gatherings.

 

HOUSEHOLD BUDGET WORKSHEET
  Typical Adjusted Difference (+/-)
HOUSING
Mortgage/taxes/insurance or Rent      
Utilities (hydro, water, gas, trash)      
Phone, internet, cable      
Home maintenance and repairs      
FOOD
Groceries      
Restaurants      
TRANSPORTATION
Car payment/insurance      
Gas, maintenance, repairs      
OTHER
Health insurance      
Clothing and personal care      
Childcare      
Entertainment      
Charitable contributions      
Savings, retirement, college fund      
INCOME
Salary/wages      
Bonus, tips, other      
MONTHLY TOTALS
Total Adjusted Income  
Total Adjusted Expenses
EXTRA SAVINGS FOR YOUR HOLIDAY BUDGET  

Feel free to utilize this worksheet as a template that you can customize to your needs or ask us for a PDF copy that you can print out and use right away.

 

WE’RE HERE TO HELP

We would love to help you meet your financial goals now and, in the year, ahead. Whether you want to find lower-cost alternatives for home renovations, maintenance, or services, we are happy to provide our insights and referrals.

And if you’re saving up to buy a new home, we can help with that, too. This is the perfect time to score a great deal because only the most motivated homebuyers and sellers are active in the market right now. So reach out to schedule a free consultation with the JP Realty Team. We can fill you in on some of the exciting programs and incentives we’re seeing that help make homeownership more affordable.

 

The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

 

Sources:

  1. CTV News –
    https://www.ctvnews.ca/lifestyle/8-tips-for-saving-on-your-home-heating-this-winter-1.6116384
  2. CBC News –
    https://www.cbc.ca/news/world/goodwill-online-store-1.6605808
  3. MoneyWise –

https://moneywise.ca/news/economy/canadians-plan-to-spend-less-as-retailers-brace-for-shopping-season

  1. Statistics Canada –
    https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2022014-eng.htm
  2. Statista –
    https://www.statista.com/statistics/998634/consumers-who-have-shopped-at-thrift-stores-canada/-​​
  3. Retail Insider – https://retail-insider.com/retail-insider/2022/08/resale-going-mainstream-in-canada-with-consumers-particularly-valuing-brand-owned-resale-report/
  4. NAIMA Canada – https://www.globenewswire.com/en/news-release/2016/10/27/1263857/0/en/New-Study-Reveals-Most-Homes-in-Canada-Are-Significantly-Under-Insulated.html
  5. Natural Resources Canada – https://www.nrcan.gc.ca/energy-efficiency/homes/make-your-home-more-energy-efficient/keeping-the-heat/chapter-7-insulating-walls/15641
  6. Government of Canada – https://www.nrcan.gc.ca/energy-efficiency/homes/canada-greener-homes-grant/start-your-energy-efficient-retrofits/plan-document-and-complete-your-home-retrofits/eligible-grants-for-my-home-retrofit/23504

 

 

Posted by Christine Pecharich in Blog Posts