Housing prices in Canada fell six percent to $ 746,000 in April as higher interest rates poured cold water on the hot real estate market.
Home sales fell 12 percent nationwide in April, with the biggest drop in major cities like Toronto, the Canadian Real Estate Association said Monday.
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Prices peaked at a record high of more than $ 816,000 in February this year, and average house prices have been falling for two months in a row. The average price was $ 796,000 in March, before falling another six percent in April, which is usually a strong month for the housing market.
“After a record few years, housing markets in many parts of Canada have cooled sharply over the past two months, in line with rising interest rates and customer fatigue,” CREA Chairman Jill Audil said in a statement.
CREA says the average selling price can be misleading because it is easily distorted by expensive and numerous sales in major cities such as Toronto and Vancouver. He highlights a different number, called the housing price index, as a better measure of the market as it adapts to the volume and type of homes sold.
HPI fell 0.6% in April, the first monthly decline in two years.
Although prices are lower than their recent peak, they remain up about seven percent from a year ago.
Still, the figures paint a picture of a housing market that is cooling off from its hectic activities just a few months ago.
“Excessive increases in more expensive homes (such as single homes) during the pandemic could give way to a sharper decline,” TD Bank economist Rishi Sondi said in a note to customers.
“Moving forward, we expect prices to continue to fall, reflecting the cooler background of demand.
Problem for sellers – and for some buyers
Lower prices may be welcome news for buyers trying to enter the market but worrying for those trying to sell – especially if they have already bought elsewhere.
For some recent buyers, a market that has cooled after buying can cause major headaches. Some who have bought at the highest values, assuming that their creditors will give them a certain amount, find in the valuation process that the bank values this property less than expected, forcing buyers to have to invent more than have expected in advance.
Lea Zlatkin, a mortgage broker at Lowestrates.ca, cites the example of a buyer who offered $ 1.2 million for a home and predicted that their lender would finance 80 percent of the cost. However, the creditor estimated the property at $ 1.1 million, forcing the buyer to come out with tens of thousands of dollars more than he expected.
“When home buyers have really expanded their budgets and bid above the asking price, we are beginning to see that these estimates are slightly lower in some cases,” Zlatkin told CBC News.
Keith Lancastle, chief executive of the Canadian Valuation Institute, says it’s not uncommon in foaming markets for buyers to be attracted and offered much more than the appraiser appreciates the property – and the same is true for downstream markets.
“The sale price does not drive the mortgage, the appraised value drives the mortgage and that is the value on which creditors base their decision,” he said.
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The slowing market is also worrying for those who jumped to the top and are now feeling sorry for the buyer. This is something that recent buyers Joshua Keys and Yuri Nakashima are unfortunately familiar with after buying their first home in Sudbury, Ont.
Joshua Keys and Yuri Nakashima recently bought a home in Sudbury, Ont., Without a home inspection, and say they regret not doing a proper inspection of their property. (Gillian Whitley / CBC)
Since they lived in Vancouver, they worked with a broker from Sudbury who, according to the couple, deceived them and prompted them to offer much more than the asking price for a property that has since turned out to have many water problems and other damage. cockroaches and other structural problems.
They say they have not even been able to view the home virtually or in person before submitting their unconditional offer, regardless of the home. They now face a six-figure bill to renovate their currently uninhabited dream home, they said.
“We hope our story will serve as a warning story for other home buyers for the first time,” Keys told CBC in an interview. “Make sure you take care of yourself, otherwise people will take advantage of your ignorance.”
“We want to make sure that doesn’t happen to other people.”
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