Experts say Ontario's wild housing market could soon finally bottom out
Canada's topsy-turvy housing market may finally be cooling off from the shock of successive interest rate hikes, kind of like how you stop a hard-boiled egg from cooking by dunking it in cold water.
Ontario has proven a hotspot in runaway housing prices through the madness of the last decade or so, and that same sustained price acceleration has given the market plenty of altitude to fall from.
The report acknowledges that "the swing in the market over the past year has been nothing short of spectacular," noting how the previous year "started extremely overheated as exceptionally low interest rates, changing housing needs and elevated investor involvement supercharged demand."
"But the Bank of Canada's aggressive hike campaign beginning in March triggered a massive correction. It resulted in monthly activity falling nearly 40 per cent to the lowest levels in more than a decade (excluding the pandemic lockdown period) by the fall."
RBC suggests that "a cyclical bottom is approaching—likely in early 2023," as housing markets across Canada reel from the chain of successive interest rate hikes in 2022 and the resulting skyrocketing mortgage payments.
It attributes this forecast to a slight uptick in month-over-month activity for the second time in three months but warns that there is still some room for prices to decline further in the weeks and months to come.
The report says that after ten straight months of declines in the Canadian MLS Home Price Index, continued declines are expected until the spring at the earliest "as poor affordability continues to weigh heavily on buyers."
Some of the most substantial price corrections have been occurring in Ontario markets, though the report notes a recent trend of stabilization is widespread from coast to coast, including right here in Canada's most-populous province.
a few interesting graphs from RBC Economics released today. pic.twitter.com/gUyxoicLUE— daniel de melis (@d_demelis) January 17, 2023
"Activity is levelling off in the majority of local markets, including Toronto and the rest of southern Ontario," states the RBC report.
Nationwide, the MLS Home Price Index has fallen 13 per cent since peaking in February 2022, though some markets in Ontario have experienced declines in excess of 20 per cent, including Hamilton, Kitchener-Waterloo, Cambridge, Brantford and London. Toronto prices declined by 14 per cent during the same period.
Home resales fell off a cliff nationwide in 2022, declining by a staggering 25 per cent and erasing gains made over the two previous years. And it was much worse in Ontario, where demand dropped by 32 per cent, outpaced by only British Columbia at 35 per cent.
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