Very interesting to see where the market is 5 years after the last correction in 2017.
Big differences this time is:
1. Inventory is very low, so Buyers do not have a lot to choose from, which is causing a lot of pressure in the sub $1.2m price point
2. Interest rates are much much higher, making it harder for those without a lot of existing home equity to buy as their monthly costs of home ownership are much hight.
IN the months following April 2017, inventory went from 78 active listings at the end of February 2017, to 422 at the end of October 2017. Compared to 2022, when there was only 104 active listings at the end of February and there is currently only 117 active listings today (November 23, 2022). While in the 2017 correction, active listings counts continued to rise through the year, peaking in May 2018 with 431 active listings, where in 2022, active listings
If you have a $500,000 variable rate mortgage, you are paying nearly double ($1,100 more) per month than you would have been at the start of the year. Payments from January 2022 of $2122/mo for a $500,000 mortgage, would now pay for a mortgage of approximately $333,000 (+/- a few thousand).
The reality of why prices have come down, but have not fallen off is because while Buyers have less Buying power with higher interest rates, they have very little to choose from, so nice homes in high demand price points are still seeing multiple offers.
Currently there is 39 homes for sale over $1.5m in Newmarket, while only 10 in this price point have sold this month.
However, there is 52 Homes for sale under $1m, and there has been 32 homes that were listed under $1m sell this month. Of those 32, 5 sold over $1m in what we presume was a multiple offer scenario.
At the moment, the market is not crashing here. Strong demand for homes is still there, but the affordability of those homes is the data point in question. We are hoping that the Bank of Canada is cautious with future rate hikes as it could have move devastating effects on the economy long term, and we would like to see some more time pass to allow more data to be reported on what is happening in the economy now as we do not feel the effects of the recent rate hikes have been fully realized yet.