Home prices in Canada fell 6% in April to $ 746,000. This is because high interest rates have poured cold water into the fierce real estate market.
According to the Canadian Real Estate Association, home sales fell 12% nationwide in April, with the largest decline in big cities such as Toronto.
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Prices in February this year exceeded a record high of $ 816,000, with average home prices declining for the second straight month. The average price in March was $ 796,000, but fell another 6% in April. This is usually a good month for the housing market.
CREA Chair Jill Audil said in a statement, “After a record few years, housing markets in many parts of Canada have cooled considerably in the last two months, with interest rate spikes and buyer fatigue. “.
According to CREA, average selling prices can be misleading as they are easily distorted by expensive and large numbers of sales in big cities such as Toronto and Vancouver. It is tailored to the quantity and type of homes sold, thus emphasizing another number called the Home Price Index as a better gauge for the market.
HPI shrank 0.6% in April, the first monthly decline in two years.
Prices have fallen from their recent peak, but have risen by about 7% from prices a year ago.
Still, this figure shows that the housing market has cooled from the enthusiastic activity of just a few months ago.
“The exorbitant surge in more expensive units (such as single-family homes) during a pandemic could give way to a sharp decline,” TD Bank economist Rishi Sondi said in a note to customers. Said.
“We expect prices to continue to fall, reflecting the chilling demand.”
Problems for sellers — and for some buyers
Low prices may be welcome news for buyers trying to enter the market, but they can cause anxiety for buyers trying to sell, especially if they have already bought it somewhere.
For some recent buyers, a cold market after purchase can be a major headache. Buyers are proactive because the valuation process finds that banks value their assets lower than expected for some who buy at high prices, assuming that the lender lends them a certain amount. You need to come up with more than you expected.
Leah Zlatkin, a mortgage broker at Lowerrates.ca, shows an example of a buyer making an offer, assuming the lender lends 80% of the cost. However, when a property is valued, it is valued much lower than the offer price, forcing buyers to scramble to come up with a much larger down payment than expected.
“When homebuyers actually increase their budgets and bid above the asking price, they’re starting to see their ratings go down a bit,” Zlatkin told CBC News.
Keith Lancastle, CEO of the Canadian Appraisal Institute, says it’s not uncommon for buyers to get hooked and offer far more than appraisers value real estate in a bubbling market. The same applies to the downmarket.
“Selling prices don’t drive mortgages, valued values drive mortgages, and that’s the value that lenders base their decisions on,” he said.
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The slowdown in the market also causes anxiety for those who have jumped to the peak and are now remorseful for buyers. This is what recent buyers Joshua Keyes and Yuri Nakashima are sadly familiar with after buying their first home in Sudbury, Ontario.
Since they lived in Vancouver, they worked with a real estate agent based in Sudbury. The couple did not encourage sufficient due diligence, so they offered far beyond the price of real estate that proved to have a lot of water and other problems. Damages, cockroach epidemics and other structural problems.
They say they didn’t look at the house virtually or directly without an inspection of the house before submitting an unconditional offer. They said they are currently facing a six-digit bill to repair their currently inhabitable dream home.
“We hope our story serves as a reminder to other first-time homebuyers,” Keys said in an interview. “Be sure to do due diligence, otherwise people will take advantage of your ignorance.”
“I want to prevent this from happening to others.”