Expert Housing Market Forecasts for the Second Half of the Year

The housing market is at a turning point, and if you’re thinking of buying or selling a home, that may leave you wondering: is it still a good time to buy a home? Should I make a move this year? To help answer those questions, let’s turn to the experts for projections on what the second half of the year holds for residential real estate.

Where Mortgage Rates Will Go Depends on Inflation

While one of the big questions on all buyers’ minds is where will mortgage rates go in the months ahead, no one has a crystal ball to know exactly what’ll happen in the future. What housing market experts know for sure is that the record-low mortgage rates during the pandemic were an outlier, not the norm.

According to CMHC, inflation in Canada has reached its highest level in nearly 4 decades prompting moves to raise policy interest rates with further hikes to come. The attention for many turned to what this means for future housing activity. Most important concerns focus on:

• what this means for the outlook for house price growth in Canada
• the industry’s ability to accelerate housing supply to begin restoring housing affordability in this country

The Canadian economy has rebounded from the pandemic. Strong economic growth and strong job creation have caused the unemployment rate to drop to an all-time low of 4.9%. As of early 2022, the Bank of Canada estimates that demand for goods and services is becoming greater than what the economy can produce in Canada1.

This excess demand is a key source of upward pressure on inflation. To contain inflation, the Bank of Canada raised its policy interest rate 3 consecutive times, totaling 125 basis points from March to the end of June 2022. The current consensus among economists predicts further policy interest rate hikes from the Bank of Canada.

Until inflation peaks, mortgage rates won’t either. Without improvement on the inflation front, we don’t know where the interest rate ceiling will be.

Whether you’re buying your first home or selling your current house to make a move, today’s mortgage rate is an important factor to consider. When rates rise, they impact affordability and your purchasing power. That’s why it’s crucial to work with a team of professionals, so you have expert advice to help you make an informed decision about your best move.

 
The Supply of Homes for Sale Projected To Continue Increasing

This year, particularly this spring, the number of homes for sale has grown. That’s partly due to more homeowners listing their houses, but also because higher mortgage rates have helped ease the intensity of buyer demand. Moderating buyer demand slows down the pace of home sales, which in turn helps inventory rise.

More homes to choose from is great news if you’re craving more options for your home search – just know that there isn’t a sudden surplus of inventory on the horizon. Housing supply is still low, so you’ll need to partner with an agent to stay on top of what’s available in your market and move fast when you find the one. It’s not going to be easy to find a home, but it certainly won’t be as difficult as it has been over the past two years.

Home Price Forecasts Call for Ongoing Appreciation

Due to the imbalance between the number of homes for sale and the number of buyers looking to make a purchase, the pandemic led to record-breaking increases in home prices.

Even though housing supply is increasing today, there are still more buyers than there are homes for sale, and that’s maintaining the upward pressure on home prices.

The high rates of house price increases during the last two years have been unsustainable. The cost of housing reached levels that are unaffordable for a large share of new home buyers, translating into a slowdown in 2022. The expected increases in borrowing costs contribute to a further slowdown in house price growth in 2022 and 2023. The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.

The housing market will see deceleration, but not depreciation, in prices.

Bottom Line

Whether you’re a homebuyer or seller, you need to know what’s happening in the housing market, so you can make the most informed decision possible.

For current homeowners looking to sell, know your home’s value isn’t projected to fall, but waiting to make your purchase does mean your next home could cost more as home prices continue to appreciate. Don’t let the headlines about the market cooling or moderating scare you. The housing market is still strong; it’s just easing off from the unsustainable frenzy it saw during the height of the pandemic – and that’s a good thing. It opens up new opportunities for you to find a home that meets your needs.

For Home Buyers the housing market is undergoing a shift because of higher mortgage rates, but the market is still strong. If you’ve been looking to buy a home over the last couple of years and it felt impossible to do, now may be your window of opportunity. Buying a home right now isn’t easy, but there is more opportunity for those who are looking. It may make sense to do so now before prices climb higher. But rest assured, once you buy a home, that price appreciation will help grow the value of your investment.

Sources :

^[1] https://www.bankofcanada.ca/wp-content/uploads/2022/04/mpr-2022-04-13.pdf

    CMHC The road ahead for economy and housing July 2022