It has been an interesting few months in the real estate industry as the lack of inventory across most of the country, especially in southern Ontario, has fuelled an extremely over heated market.  In fact, this is the lowest amount of homes I have seen available in my 25 years in the profession.  The Canadian Real Estate Association, which represents 140,000 Realtors nationwide, supports this observation in their recent article Canadian Home Buyers Face Record Listings Shortage to Begin 2022.

If you want to know where the hottest markets are in Ontario, other than Toronto, check out this Canadian Real Estate Magazine article. You can find lots of other good information there as well.

In our market specifically, the last 2-3 months have seen a record low inventory of homes push prices out of reach for a lot of local buyers. The hardest hit are local first-time home buyers who can no longer get into the real estate market due to the high prices of what used to be considered ‘entry level’ homes.  Hence, more people continue to rent and, of course, that higher rental demand has pushed up the price of rental accommodation as well.  The following graph shows how local Quinte market prices have increased over the last four years. 

 In the last few weeks I have seen numerous multiple offer situations where there have been numerous out of town buyers competing with one local buyer for the same home.  Rarely can the local buyer compete with higher offers from out of town buyers.

Another drastic change in the home buying process has been the elimination of conditions in offers associated with competing offers. For example, we very seldom see an offer ‘conditional’ on satisfactory financing and/or home inspection. In fact, it has gotten so bad for home inspectors that, in Ontario, it has been estimated their numbers have dwindled from over 800 inspectors in 2017 to about 80 this year.  

Of course, the lack of a financing condition can also prove to be ‘risky’ if a buyer grossly over pays with a ‘cash offer’ and the subsequent bank appraisal does not support the offered price. In some cases, the transaction may not close on time, or not close at all, because the bank will not finance the home for the amount the buyer needs. This obviously puts the seller in a bad position as well because they may have already purchased another property, hired movers, etc.

With US and Canadian central banks indicating an increase in interest rates in the near future, I would suggest the high prices will continue to climb as buyers try to secure homes at today’s lower mortgage rates, as opposed to the higher rates that are coming soon.  

Whilst I don’t envision the prices of homes going down in the next 2-3 months, there could certainly be some pull back on values by the end of the summer.  

Finally, I would like to say that our high prices are driven by a true lack of supply. There are not enough homes for the numbers of Canadians who want to buy into the Canadian dream. This problem cannot be solved by more taxes, artificially inflated qualifying interest rates, or more ‘government chatter’.  We need to ramp up the supply in a serious fashion so Canadians have more affordable options when it comes to determining how they are going to fulfill their dreams of homeownership.  

David Weir BA, CD