Do we expect to see stability in 2023?

Highlights: 

1. Are we closer to the bottom? 
2. Market Trends - November & October
3. Interest rate - What’s next? 
4. Mortgage Affordability

In my last newsletter, I mentioned how buyers' behaviors and sellers’ expectations changed. Reduction in the gap between listing and the actual sales price, and the resulting impact reflected in the volume of real estate transactions from month to month during the period from August to October, 2022. 

November 2022 seemed better and showed a continuity of a similar trend. We saw more buyers were interested in closing the deal and sellers were settling at a decent offer, especially after the last rate hike.

As inflation is showing some signs of improvement, buyers are attracted to lucrative deals available in the market to grab. Needless to say, in any market, stability is the first sign of growth momentum. 

Given we are heading to the holiday season, the expectation is a pause and fewer transactions, but I expect more deals to close in Q1 2023.

Re/Max Canada also expects market stability in 2023. I would say that even if the decline is paused, it will be enough to boost buyers’ sentiments. CREA reports that since February 2002, October was the first month to see an increase in sales, however still 36% lower than the previous year, yet, the signs are positive. 

The bigger question is are we close to the bottom of the real estate prices? 

Happy to hear views and feedback from the readers of my newsletter.

Interest Rates:

We will see 2022’s last increase in interest rates this week. It still is anyone’s guess, but most agree that the increase will be lower than the previous rapid increases. I expect around 0.25%. 

Given we are already at a 5.5% variable mortgage rate, I do not think another 0.25% increase would move the needle much. However, some homeowners or investors on variable interest rates will feel the heat and those going for mortgage renewals or taking a new mortgage will certainly have concerns. 

There is always a solution to every challenge in life. Anyone facing any challenges in this regard, please contact me for further discussion to figure out the solution. 

Ketki Saxena , Chief Editor, Canada  Investing.Com wrote “Interest on New Canadian Mortgages up to 250% Higher Compared to a Year Ago”

Canadians have seen a double-digit mortgage rate too, in reference to 2021, simply put, more money is going towards interest rate payments! Such a rapid and high increase in interest rate, also resulted in the banks increasing their qualifying rate to 7.95% (earlier it was 5.25%) which has reduced buyer mortgage capacity by more than 25%.

Expectations for next year!

Market sentiments will continue moving in both directions, at least until interest rates get a pause. Having said that, more transactions are expected to happen. Logically speaking, when markets see more transactions, sentiments improve, triggering more demand. As sales are showing signs of improvement, more listings in the market, and positivity is on the horizon. 

As Canada is expected to welcome approximately Half a Million new Immigrants next year, I am expecting Q1 2023 to experience some interesting developments in the real estate market. 

I wish all the readers, my connections, and the LinkedIn family all the very best for the holiday season and enjoy this time with family and friends.

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