The raving real estate market in Canada has continued to flourish. This past March, 70,000 homes were sold, accounting for 70% growth in sales since 2020. This easily demolished the past record of 20,000 homes sold in the month. The level of sales was 76% higher year-over-year in March, more than making up for the slowing down of the market at the beginning of the pandemic.
Canadian home prices have been growing at the quickest pace to date, sending prices soaring nationwide. The average Canadian home now goes for a whopping $716,828, after prices grew by a record-breaking 31.6%. In Ontario, the average home price is even higher, at $862,276. Property sellers have been over the moon about selling prices, having no issue drawing multiple buyers into bidding wars over homes that keep getting more and more valuable.
Regulators, on the other hand, are worried that such a strong seller’s market may disadvantage too many potential buyers, especially first timers. Many borrowers hoping to buy a home are at the mercy of lenders, finding themselves taking on huge mortgage payments which may become too expensive if interest rates rise in the future. As such, the country’s leading regulator issued a proposal to raise the mortgage stress test rate to 5.25%. This would require prime borrowers to qualify at the higher rate inorder to help ensure they have the finances to continue to make payments should interest levels later change in the future.
Many experts agree that prices have been exacerbated by the limited supply of homes on the market, relative to the enormous number of buyers. With not enough homes available, buyers have to compete between each other, sending prices skyward. The spring season has historically seen an influx of housing supply, so buyers may be in luck soon when the market is likely to rebalance.
However, simple supply and demand imbalances do not fully explain the astronomical prices that have risen so quickly. The past month alone shattered the previous record of listings posted, suggesting there are more forces at play. Some economists argue that the real driver of prices has been the colossal level of demand. Buyers have been keen on acquiring more space, with the pandemic forcing workers to go remote and the lack of activities available in cities. The sheer number of buyers looking to move out of cities elsewhere makes any level of supply inadequate, even the record number of listings in March.
Experts will have a close eye on the market for the next few months, as the proposed stress test changes would only come into effect in June. When the stress test was first introduced, many buyers stormed into the market to lock down low mortgage rates while they still qualified. As interest rates are currently sitting at record lows, buyers may again be prompted to act fast and get low rates while they still can. This kind of reaction would only encourage prices to continue to grow at such fast rates.
An experienced mortgage broker at Clover Mortgage can help you secure a mortgage at an excellent rate. In such a red-hot market, amid complicated policy changes, borrowers need all of the help they can get to afford their dream home. Our mortgage brokers will work with you every step of the way to make sure you can get the best mortgage for you. Act now and call us today at 416-674-6222or email us at firstname.lastname@example.org mortgage rates are still at record-low levels!