Cost of Homes Still Skyrocketing
CBJ — The Canadian real estate market continues to confound most experts who say the continuation of skyrocketing home prices defies logic, and yet here it is, still happening. And, it’s not just occurring in the traditionally expensive major centres such as Toronto, Vancouver and Montreal. It’s now fully engulfed most of the mid-sized and smaller urban centres as well.
Virtually every province in the country has continued to see an upward trend not only in home prices but also in sales volumes. Nationwide, sales were up 75% in March compared with the same month in 2020 while average selling prices were up about 32%.
According to figures collected by the Canadian Real Estate Association, more than 70,000 homes were sold in the third month of 2021.
The average selling price on CREA’s MLS system was nearing $720,000.
Of concern to economists is that first-time buyers will be locked out of the market unless they take on very long-term mortgages with high monthly payments, assuming a lender will take a chance on them. Interest rates are exceedingly low right now and many still cannot afford to purchase a home. If interest rates were to go up by even a percentage point, it would take thousands more potential owners out of the equation.
In a depressing revelation for young people, a recent survey revealed about 35% of Millennial-aged workers say they have already completely given up hope of ever owning a home in their lifetime.
The main reason for skyrocketing prices is quite simple: far more demand for housing than supply, which sets off bidding wars. It’s not uncommon for some homes to sell for 10% to 20% over their already inflated original asking price.
Construction of new housing has been hampered by slowdowns due to the COVID-19 pandemic. Some relief is expected when a number of projects are completed, which should satisfy a significant portion of the current demand. While more demand should slow down skyrocketing prices, most economists say it won’t likely ever go into reverse. It would seem that the best case scenario for potential home buyers would be for the increase to slow down, but an actual reversal in pricing is highly unlikely for most regions.
Average Home Prices in each province (most expensive to least expensive, according to CREA)