Niagara, a “microcosm” of real estate trends observed across the country
During the early months of the pandemic, as individuals and families left the cities in search of bigger homes and bigger yards, Niagara’s housing market grew, with prices rising as the demand was increasing.
But as people return to the workplace, interest rates rise and gas prices remain high, some are returning to their old stomping ground, while others are looking to cash in on previous investments. .
In its monthly report, the Niagara Association of Realtors said the number of home sales fell 38.2% in August, year-over-year – to 457 from 740 – but rose 23.8% – at 457 against 369 – compared to July.
The average days on market was flat month-over-month, but rose 55% – from 20 to 31 – from the same month a year ago.
The number of new registrations reported last month increased 25.6% — from 872 to 1,095 — year over year, and decreased 6.7% — from 1,174 to 1,095 — month to month.
This is an expected market correction, said Edgard Navarrete, regional economist at Central 1 Economics, and Niagara is a “little microcosm” of what is being seen across the country.
When the pandemic first hit in 2020, Navarrete said economists predicted a housing market crash. But when the government stepped in, providing financial support, and interest rates were lowered dramatically to help keep the Canadian economy afloat, “everyone wanted to participate.”
“Interest rates were just too attractive for someone looking to buy. They just came in because a lot of people were on the sidelines before the pandemic and they just got pulled into the market,” he said.
“It increased everything. He put it in hyper-drive. Now we are just getting back to more normal activity as politics (raising interest rates) is starting to cool the market. »
Navarrete said he was one of the people who moved from Toronto to small town Ontario due to affordability, but as employers begin to force people back into the office, offering a hybrid style , “you’re starting to see an influx of people moving back to the big cities,” which is impacting outlying housing markets like Niagara.
Add to that the Bank of Canada’s interest rate hike in a bid to rein in rising inflation, with further increases expected in the coming months, and higher gasoline prices limiting the people’s desire to travel on the roads for longer periods of time, and the market is slowing down.
The NRA said Niagara’s benchmark residential home price fell 4.05% in August from July, marking the fifth consecutive month that Niagara has seen a price drop. The total number remains in positive territory, up 4.4% year over year from $658,500 to $687,500.
But while some homeowners have lost “paper value,” Navarrete said home values are still up from pre-pandemic times.
And for those who bought during the peak months, he expects people and families to live in their new homes for a while, with no immediate plans to sell.
“If you’re a pinball machine and bought in February 2022, you’re probably stressed right now,” he said. “If you’re someone who’s bought a house to live in for a long time, or at least a few years, I think you’ll be fine…real estate has its ups and downs. We have seen these waves before.
He expressed concern that if key rates hit 5% – as of September 7, the rate was 3.25% – which is possible, it would have “certain effects” on the housing market. Homebuyers who cannot get the prices they want will not list their homes and instead enter the rental market.
Potential buyers will “stay rented or live with estranged families”, he said.
“They just won’t be able to get the mortgage they want and it’s just going to slow the market down as sellers pull those listings (from the market) understanding that the market has changed,” Navarrete said.