It’s welcome news for prospective buyers hoping for a better price.  But as the busy fall season approaches, brokers and economists are at odds over how long the price slump will last and how low it will go.
“The fall will be interesting because we’ll probably see more buyers jump into the market, and you don’t need a ton more buyers to get a little more price stability,” said John Pasalis, president of Realosophy.  Realty Inc.  in Toronto.
“Just a small increase in demand could be the difference between homes selling in three, four weeks versus selling in two weeks or selling much faster.”
The median home price is still above pre-pandemic levels, but rising mortgage rates and inflationary pressures are weighing on the market.
When pandemic lockdowns began in March 2020, the Toronto Regional Real Estate Board said the median home price in the area — one of the hottest in Canada — was $902,680.  Last month, it was $1,074,754, a 1 percent increase from July 2021 but a six percent drop from June 2022.
The latest data from the Canadian Real Estate Association (CREA) showed prices reached $629,971 in July, down five per cent from $662,924 last July.  On a seasonally adjusted basis, it was $650,760, down 3% from June.  When pandemic lockdowns began in March 2020, the national average was $543,920.
The association predicted that the national median home price would rise 10.8 percent annually to $762,386 by the end of 2022 and reach $786,252 in 2023.
However, some economists expect an even bigger drop in prices.
In June, three Desjardins economists said they expected the national median home price to drop 15% between February’s high — $817,253 — and the end of 2023, but because “we’re almost there,” they adjusted their forecast to August to predict a drop of between 20 and 25 percent.
“House prices continue to fall and have further to go to bottom out,” Randall Bartlett, Hélène Bégin and Marc Desormeaux said in a report published on July 11.
“That said, we still believe home prices will end 2023 above pre-pandemic levels nationally in all 10 provinces.”
In anticipation of falling prices, agents have seen prospective buyers sit on the sidelines of the market in recent months, while sellers come to terms with the fact that their homes won’t fetch as much money as they did at the start of the year.
Lori Fralic calls it a “dead end.”
“We’re seeing lowball offers,” said the Vancouver agent with Keller Williams Realty VanCentral.
“There are a lot of bargain hunters out there throwing offers, but if they don’t have to sell, a lot of sellers say, ‘no, sorry, I’m not taking it.’
It’s a change from the torrid pace of sales and frenzied bidding wars seen earlier this year and late last year.
Much of the shift is attributed to mortgage rates, which reflect interest rate fluctuations and can affect purchasing power.
The Bank of Canada raised its key interest rate by one percentage point to 2.5% in July, the largest increase the country has seen in 24 years.
Economists predict the increases will continue, and Fralic said they are already encouraging people who don’t need to buy right away to stop.
He’s seen a drop in prices in BC, but said it’s not as big of a drop as many expected.
“If people think (prices) are going to plummet, I don’t think that’s accurate,” he said.
“If you look at the 10-year average of Metro Vancouver, home prices are very bullish, and if they fall, they can fall slightly and come back. There’s always been a steady gradient with falls along the way.”
The Real Estate Board of Greater Vancouver said the composite benchmark price for the area — often Canada’s hottest — was more than $1.2 million in July, an increase of about 10 per cent from July 2021 and a drop of two percent from June 2022.
“It’s anyone’s guess how much prices will fall,” said Sherry Cooper, chief economist at Dominion Lending Centers.
Markets, he said, tend to be very local, and the rises or falls seen by some may not be replicated in others.
For example, he said Alberta hasn’t seen the slowdown of many other Canadian markets because its energy sector is much stronger than in the past.
However, Cooper noted that home sales activity has fallen very sharply in the Greater Toronto Area, the Greater Golden Horseshoe region and parts of British Columbia around Vancouver.
“It’s the markets that saw the 50 per cent increase in home prices that saw the biggest correction and that’s what you’d expect because those are the most expensive homes in Canada with the largest outstanding mortgages.”
This report by The Canadian Press was first published on August 24, 2022.