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Canada's housing market: 5 things to know this spring, from mortgages to supply

Steven Ladurantaye
·4-min read

Canada’s real estate market is an enigma at the best of times. Naysayers have been waiting for a crash for more than a decade, pointing to markets around the world as examples of the inevitable doom waiting just over the horizon for house-hungry Canadians.

So you can forgive buyers and sellers for the twitch they’ve developed every time the conversation turns to real estate. And this is the time of year the talk gets loudest, with spring just around the corner and thoughts of cashing out on existing homes sets in like a fever.

Here are five things about where the market seems to be at the moment.

1 - Anecdotes Abound

Did you know your neighbour’s cousin’s brother sold his place for $3-million over asking the other day? And the house down the street? People lined up for six hours to take a look and a bidding war broke out in the driveway - people were hospitalized!

Real estate agents are trying to figure out what’s going on and the more vocal of them are using their Twitter accounts to share information about what they are seeing. Not all of them are certain the market will stay so tight.

“There isn’t the mass hysteria happening for showings,” said one former president of the Toronto Real Estate Association just as the market was looking frothy at the start of March. “Lots of agents are saying they aren’t getting near as many showings this week. The next few weeks should be telling.”

2 - There aren’t many houses for sale, yet

The most recent data from the Canadian Real Estate Association covers January, and the main storyline was straightforward - nobody was putting their house up for sale in the depths of winter. This isn’t unusual.

But the difference from other years is that it’s difficult to tell if this is a sign of things to come, or just a hangover from the worst autumn days of Covid-19 and fears about the second wave.

“The best-case scenario would be if we see a lot of sellers who were gun-shy to engage in the market last year making a move this year,” the association’s senior economist Shaun Cathcart said. “A big surge in supply is what so many markets really need this year to get people into the homes they want, and to keep prices from accelerating any more than they already are.”

February’s data - out next week - will matter. March will matter more.

3 - Why are houses so expensive?

Houses that are selling are selling for sky-high prices. A simple Google search turns up dozens of breathless stories about houses that sold for hundreds of thousands over asking, as buyers locked themselves into bidding wars for the few houses available.

Everyone is used to hearing stories about Vancouver prices, so it’s hard to be too shocked at a house that sold for $600,000 over asking. But it’s not as often you see houses in Kitchener, Ont. or Kingswood, Nova Scotia zooming hundreds of thousands of dollars past their asking price.

One possible reason? A flood of big-city folk realizing they can sell their fancy house for all kinds of money and buy something nicer, for less, somewhere a bit more... scenic.

4 - Are mortgage rates rising?

A Yahoo Finance Canada story last week pointed out mortgage rates are creeping higher for the first time since the start of the pandemic. They are bumping slightly higher from record lows, but that’s also causing some potential buyers to jump in on the few houses available to save some long-term money.

“Record low mortgage rates have helped fuel a record rally in house prices, and even with the increases remain historically low,” the story pointed out. “Experts say the increases are unlikely to put a chill on the real estate market on their own. But it does mean buyers will have larger fixed mortgage payments they’ll have to budget for.”

5 - Will houses remain expensive?

John Lusink, president of Ontario’s Right at Home Realty, said all of those factors have him worried about the sustainability of prices as we head into spring and summer. His company has seen a 28 per cent increase in listings from this time last year, but he said most of the gain was from condominium listings in the province’s larger markets.

“This confluence of factors has brought on a return of worryingly high home price increases,” he said.

The trends that saw the American market decline sharply - predominantly tricky mortgages that ballooned after a few years and left homeowners unable to pay - aren’t present in the Canadian market.

But as spring turns to summer, Canadians should have a better idea of whether their love of real estate is a healthy obsession or not.