What Experts Say Will Happen with Home Prices Next Year
Experts are starting to make their 2023 home price forecasts. Most agree homes will continue to gain value at a slower pace. Over the past couple of years, home prices have risen at an unsustainable rate, leaving many to wonder how long the rally will last. If you're asking yourself: what's ahead for the price of my home? Know that experts are now answering this question, and it's welcome news for homeowners who the media may have led to believe their home would lose value.\ Historically, home prices have appreciated at a rate near 6% (higher in the GTA in most cases). For 2023, the average of six significant forecasters noted below is 2.5%. While one, Zelman & Associates, is calling for depreciation, the other five are calling for appreciation. The graph below outlines each expert forecast to show where their projected home prices are going in the coming year. NOTE: These forecasters are US-based, and Canadian real estate tends to appreciate faster than our neighbours down South. To understand why experts are calling for appreciation next year, look to supply and demand economics. Dave Ramsey, Financial Expert, says this: "The root issue of what drives house prices almost always is supply and demand . . ." Two things are driving home prices upward. First, the undersupply of homes on the market is an issue we continue to face in Canada. We still don't have enough homes on the market for the number of people that want to buy them. To further that point, we're still in a sellers' market nationally, and in that scenario, home prices tend to appreciate. Second, millennials are moving through their peak homebuying years. Since they're the most significant demographic behind the baby boomers, demand isn't going away soon. Bottom Line Experts are calling home prices to appreciate next year, although at a slower pace than the previous three years. The reason for this is simple. Supply and demand dynamics are playing out in real estate and will continue for many years.
3 Tips for Buying a Home Today
If you put off your home search over the past two years, you may want to consider picking it back up based on today’s housing market conditions. Recent data shows the supply of homes for sale is increasing, giving buyers additional options. But it’s essential to remember that while inventory is improving, it’s still a sellers’ market. And that means you need to prepare as you set out on your home search. Here are three tips for buying a home today. 1. UNDERSTAND HOW MORTGAGE RATES IMPACT YOUR HOMEBUYING POWER Mortgage rates have increased significantly this year, and over the past few weeks, they’ve fluctuated quite a bit. It’s essential to stay up to date on what’s happening with rates and understand how they can impact your purchasing power when you’re thinking of buying a home. The chart below can help. Let’s say your budget allows for a monthly mortgage payment in the $2,100-$2,200 range. The green in the chart indicates a payment within or below that range, while the red is a payment that exceeds it. As the chart shows, even a tiny change in mortgage rates can significantly impact your monthly payments. If rates rise, you could exceed your budget unless you pursue a lower home loan amount. If rates fall, your purchasing power may increase, giving you additional options for your search. 2. BE OPEN TO EXPLORING DIFFERENT OPTIONS DURING YOUR SEARCH The supply of homes for sale is improving, which gives you more options. But historically, supply is still low. As you search for homes, it may be worth expanding your search if you still don't find something that meets your needs. A recent article from the Washington Post (applicable to Canadians) highlights a few things buyers can consider today. It encourages opening yourself up to more areas. For example, if there's a location you've previously ruled out (like a particular neighbourhood, for example), it may be worth taking another look. And if you're able to, opening your search up to include other housing types, like newly built homes, condominiums, or townhomes, can further increase your pool of options. Even as the inventory of houses improves today, finding ways to cast a wider net during your search could help you find a hidden gem. 3. WORK WITH A REAL ESTATE PROFESSIONAL FOR EXPERT GUIDANCE Ultimately, it's best to prepare when you set out to buy a home. Jeff Ostrowski, the Senior Mortgage Reporter for Bankrate, explains: "Taking the leap to homeownership can provide a feeling of pride while boosting your long-term financial outlook, if you go in well-prepared and with your eyes open." No matter where you're at in your homeownership journey, the best way to make sure you're set up for success is to work with a real estate professional. A real estate professional can help you understand your local market and search for available homes if you're starting your search. And when it's time to make an offer, they'll be an expert advisor and negotiator to help yours stand out above the rest. Bottom Line Strategically planning your home search by understanding today's mortgage rates, casting a wide net, and building a team of experts can be the keys to finding the home of your dreams.
Toronto Market Update - July 2022
GTA HOME SALES AND LISTINGS TREND DOWNWARD Should we panic? Run for the hills? Pack up and move West? NO. There is a lot of uncertainty surrounding the real estate market in the Greater Toronto Area right now. I'm going to give you the stats, facts, and my opinion on what's going on. First, the stats. We'll start with the Greater Toronto Area as a whole and then narrow in on Toronto after. I use both condos and freehold homes in my data. STATISTICS You can use your mouse or finger to hover/click on the bars for $ values. 👇 Last month the Greater Toronto Area had an average price of $1,086,227. This is an increase of 1.85% over the previous year however, it's also a decrease of 5% over June 2022. The days on market have increased 27% to 19 from 11 last July. The amount of properties sold is down 49% over the same month last year. 👉 DOWNLOAD THE FULL REPORT HERE 👈 Last month the City of Toronto had an average price of $1,035,565. This is an increase of 1.97% over the previous year however, it's also a decrease of 10% over June 2022. The days on market have increased 14% to 16 from 12 last July. The amount of properties sold is down 37% over the same month last year. 👉 DOWNLOAD THE FULL REPORT HERE 👈 OPINION The numbers are scary. We're seeing real estate gains essentially set back an entire year because of several different factors at play in the world. Add inflation to the mix and homeowners have valid reason to be concerned. The war in Ukraine, extreme inflation (who thought printing money would do that eh?), interest rate hikes to help with said inflation, and a post-pandemic summer with no restrictions are all factors affecting the market right now. The media keeps telling us that a crash is imminent but I'm not so pessimistic, yet. REASONS TO NOT PANIC 1. POST PANDEMIC SUMMER The first reason I'm not panicking yet is because we're experiencing our first full summer with no restrictions since 2019. That's a long time to go without a proper summer and a lot of people are taking advantage of it. You've heard the Pearson Intl Airport stories, surely. People are out and about enjoying life again. Folks that planned on buying a home are taking a break to enjoy the outdoors. Once the summer is over it's my belief that we'll see a big bump in buying activity again. Additionally, the summer is ALWAYS slow in real estate. We're used to this dip every summer. It's not 'too' unusual. 2. INTEREST RATE HIKES The Bank of Canada (BOC) has been aggressively raising interest rates to fight inflation. When the BOC raises interest rates everyone becomes much more cautious with their spending. After a while, people adjust and begin spending again. We're in that adjustment period right now. 3. THE STOCK MARKET The S&P 500 has been in bearish territory for the last 6 months. This month we're seeing the beginning of a reversal in that sentiment. It's still too soon to tell if the rally will keep up, but it's a good initial indicator that economic recovery is on the way. 4. BOC BOND YIELDS The Bank of Canada market bond average yield is currently sitting at 2.92 on the 3-5 year. That same bond was at 3.54 in June. The bond yield and fixed rate mortgage are related. When the bond yield drops, so do fixed rate mortgages. The image below shows us that the bond yields are dropping, which means fixed rate mortgages are as well. This is a positive sign (if it stays that way). Any questions? Contact me below.
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