It’s a snow day. Actually, it's a “snowmageddon.” I am sitting at my kitchen table watching the snow float around and it looks beautiful. Until you go outside, then you realize how challenging the conditions make for moving around. This can be likened to our Real Estate market. Buyers look online at beautifully staged homes with dreams of moving, only to walk into a “blizzard” and flurry of activity that makes our snowfall look lacklustre.
How challenging are things currently? Let’s take a look.
Last week I blogged about how we started 2022 off with fewer homes for sale than we did last year, and last year detached homes in Oshawa, Whitby and Clarington jumped collectively $125,000. for the month of January. That was not a typo, prices jumped $125,000. in just one month! Last fall, as inventory was dropping I forecasted that a similar increase would happen for the first few months of this year. I am not psychic however it is pretty clear. Here are the preliminary mid-month results:
Oshawa: detached home average price $1,102,500 - + $67,500.
Whitby: detached home average price $1,386,000 - + $127,000
Claringtion: detached home average price $1,212,000 - + $103,000
This could be the class content for a University course covering macroeconomic laws. High demand, low supply and low mortgage rates. I have mused many times over the past few years that with more supply this issue would resolve itself. However, creating more homes is challenging. Not only challenging, it is also unpopular. The easy piece to change, making it appear that the Government is attempting to help is to make it tougher to buy homes. Over the past 15 years, our government has added stress tests making qualifying more difficult, reduced the amount of equity a homeowner can get access to, allowed lenders to charge higher rates when a buyer has a larger down payment or is purchasing a rental property and made requirements for a homeowner to re-apply when moving lenders (again, requiring them to meet stress tests.) Little has been done to address the fact that for Canada to have the same average amount of housing units as the other countries in the G7, 1,800,000 housing units would need to be created.
Currently, we have some ideas being tossed around by our Federal Government on how to help with the issues we are facing with homeownership. I ask you to make a decision if what they are planning will help our current situation.
- Increase the down payment for investment properties. For the past decade or so, 20% has been the minimum down payment for investment properties. Will increasing this to 25%, or 35% help to create more homes for sale, or just knock investors out of the market lowering the supply of rentals? This sounds good, however, when a person owns their own property and wants to move up, or out, buying and renting their own property to a tenant, they may possibly not qualify to make the move, allowing one new rental to come to market.
- Offering billions of dollars to build 100,000 “affordable” homes by 2025, to refurbish or build new affordable buildings and to convert buildings into rentals. The conditions are that this money will be distributed to municipalities when they fast-track development processes and allow higher density in built-up areas. The crisis is current, and the Federal government hopes to encourage new developments by 2025.
- Taxing the equity in a principal residence.
With Canada on track to have over 400,000 immigrants become citizens in 2022 half of which make the Greater Toronto area their home (and who need homes to live in,) the market will continue to increase in value and homes will be tougher to buy than floor seats at the Raptors. Unless….unless all three levels of our elected leaders stand up and make the tough decisions to get shovels in the ground.
Alas, an election is on the horizon… and a line I read recently speaks volumes about where we are.
“Governments promise. Governments pander. Governments blame. Governments deflect. Governments buy time.”
It is time to stop buying time, to roll up sleeves and to do what is right so my son, your kids and grandchildren can continue their belief in homeownership. Or has this ship already sailed? Let’s check back in in a few months and see what changes have been made to help homeowners and homebuyers.
Want to talk more about where we find ourselves in the market? Send me an email or connect on Facebook, Instagram or LinkedIn.