House prices will peak in the summer before starting to fall due to declining affordability, says Desjardins Group, which released its latest economic and financial forecasts on Tuesday. On net, Quebec home prices could fall 12% from their peak.
“House prices are expected to continue rising for a few weeks, but the peak will be reached this summer,” Jimmy Jean, chief economist, and strategist said. In Ontario, it seems that we have already reached the top. »
At the end of the first quarter of 2022, the median home price in Quebec was $426,831.
Mr. Jean believes the bottom will be reached at the end of 2023. However, he wants to be reassuring. “People will not lose their jerseys. Even at the bottom of the market, home values will remain 31% above 2019 levels.
House prices will have risen 50% between the end of 2019 and the peak, which will be reached in the coming weeks. The erosion of affordability will cause the announced price drops. This is mainly explained by the rapid increase in prices during the pandemic. In the coming months, affordability will continue to deteriorate primarily due to rising mortgage rates.
Desjardins’s affordability index, at 130.9 in Quebec, is at its worst level since 2008. . Finally, the rise in mortgage rates also contributed to the tightening of access to the property during the first three months of the year,” reads the latest issue of the index published on May 9.
This drop-in affordability will influence housing demand downwards. “This particularly affects first-time buyers, who account for nearly half of demand,” said Mr. Jean. He adds that the federal government has also tightened the screws on investors by requiring them to report profits from a quick resale of a home as 100% taxable business income. Provinces, such as Ontario, are proposing to add barriers to foreign investors.
take your time
The fall in prices could have been worse, according to the economist, if the supply of real estate for sale was less scarce or if there had been no demographic growth. These two factors combined are supporting the residential market.
Under the circumstances, Desjardins Group’s chief economist suggests that buyers who have the luxury of delaying their purchase wait to take advantage of more favorable conditions in a few months. “Anyone who isn’t in too much of a rush will benefit from taking advantage of the lull that’s looming over the next few months,” he advises.
Fall in new home sales in the United States
New home sales collapsed in April in the United States, weighed down by rising interest rates and record prices that are deterring many buyers from continuing their search for new homes. In April, 591,000 new homes were sold year over year from the previous month, a drop of 16.6%, according to Commerce Department data released Tuesday. This is the lowest level since April 2020, the start of the COVID-19 pandemic. All regions are affected, although the south of the country registers the most marked decrease. The magnitude of the drop surprised economists, who had forecast 750,000 transactions. In other bad news, March data was revised sharply lower to 709,000 from 763,000 originally reported. Existing home sales also fell in April and even fell to their lowest level since the start of the COVID-19 pandemic, the National Federation of American Realtors (NAR) said last week.
France Media Agency
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