Amid the COVID-19 pandemic, Canadians hoping to buy homes have had to contend with a red-hot seller’s market where inspections are waived, blind bids and dozens of competing offers are the norm.
Now, BMO’s chief economist says what many potential home seekers are hoping for — a balanced or, better yet, buyers’ market — may finally be coming.
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In a new data snapshot issued by the bank on Tuesday morning, Doug Porter said there has been a “rapid drop” in the ratio of sales to new listings, which is a key part of assessing who has more power in the market. Canadian real estate. .
That proportion fell from 76 percent to 66 percent last month, a level not seen since June 2020.
The Canadian Real Estate Association (CREA) said on Monday that level is “right on the borderline between what would constitute a balanced seller’s market and a balanced one.”
As a result, CREA noted that home prices have just seen their first monthly drop in two years.
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When it comes to the Greater Toronto Area (GTA) specifically, Porter raised the possibility of a buyer’s market.
“The GTA Sales Listing Index plunged to just 45 percent in April, which is suddenly entering buyers’ market terrain,” Porter wrote in evaluating BMO snapshot data.
In contrast, he said that number has been around 70 percent over the past year, making it a “firm seller’s market.”
“And what the relationship tells us now is that prices are about to go from gains of more than 20% to a sudden plateau. And that’s assuming the sales/listing ratio doesn’t drop any further in the coming months.”
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The Bank of Canada’s decision to keep interest rates at rock-bottom levels during the pandemic has been attributed as a major factor driving the rise in Canadian home prices in recent years.
But the change in market sentiment comes as the central bank is in the midst of a series of rate hikes that point to runaway inflation, which has hit 30-year highs as a result of reopening economies, woes of the supply chain and Russia’s invasion of Ukraine.
The lack of housing supply has also led to growing political pressure on governments at all levels to increase construction, a challenge given the wave of retirements that is about to hit the construction sector.
Right now, however, BMO economist Shelly Kaushik said in a separate data snapshot on Tuesday that new home construction is picking up, with the industry “firing at full steam.”
Whether and for how long that will continue remains to be seen.
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