So COVID happened and is still happening; and while the real estate market did take a hit in March and April, it came back like gangbusters in subsequent months. According to the Canadian Real Estate Association (CREA), August activity was up 33.5% year-over-year. Home sales hit an all-time monthly record in August as reported through the Canadian MLS Systems. It’s only now, as we move into the Fall, that we’re seeing a bit of a slowdown as is seasonally expected in any “normal” year.
Why the surge in sales during a time of uncertainty?
There could be a number of reasons. Here are three:
- Interest Rates: We have to remember that real estate is one of Canada’s largest economic sectors, and much of the heath of the overall economy depends on a healthy housing market. So, the Bank of Canada made a few changes to the (PRIME) interest rates (lowered them) in response to COVID to soften the blow to the economy.
- Technology: For the last five years, lenders, mortgage brokers, and Realtors have been developing new technology to make it easier for clients to purchase homes, and obtain financing digitally. Virtual tours, e-signatures, and dedicated client portals have been making it easier to complete virtual real estate transactions. When the country had to stay home, the transition, while having some challenges, was not difficult overall.
- Confidence level is high: There is more confidence that this is a good time to buy a house or a condo, according to a report by Mortgage Professional Canada (MPC). The report found that 59% of those surveyed had incomes higher or the same as they had pre-COVID. And of those whose incomes were impaired, half believe that there will be improvement in the coming months.
These are strong indicators of a healthy real estate market – low interest rates, consumer confidence, financial ability to pay a mortgage, and an easy way to digitally transact to finance and purchase a home.
The MPC report, the second in a 4-part series of consumer reports called Rapidly Evolving Expectations in the Housing Market, and written by its Chief Economist Will Dunning, also found that there are even higher expectations about buying homes next year, doubling from 7% at the end of last year to 16% now.
This bodes well for the next two years, for both first time home buyers and move-up buyers, barring anything unforeseen happening. Experts believe the rates will not change substantially and two government incentives – The First Time Home Buyers Incentive and the Home Buyers’ Plan can help first-timers get into the market.
Some Interesting Facts
The MPC report also found the following:
- Mortgage holders are actually showing reduced levels of regret about their mortgages
- Homeowners have not become more worried about their ability to weather a downturn in the housing market
- There is still a high degree of confidence that real estate is a good long-term investment
- There is still a strong opinion that mortgages are “good debt”
- Very few Canadians regret becoming homeowners, and that opinion has not changed in the covid-19.
- By far home owners are happy with the decision to buy their home
As the Fall market continues, the focus is on making sure buyers and sellers stay safe as the industry leverages their digital footprints. While it’s common in uncertain times to take a wait-and- see approach to the idea of buying or selling a house, we may not be seeing that. For many, this may be an ideal time to buy. There are opportunities out there.