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Unexpected Surge in Home Sales - Home Affordability Continued To Erode Slightly In December, Hitting A National Increase of 2.58% In Income Needed.

Unexpected Surge in Home Sales - Home Affordability Continued To Erode Slightly In December, Hitting A National Increase of 2.58% In Income Needed.

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    December saw an unexpected surge in home sales; however, to-be-borrowers continue to feel the impact of previous rate hikes despite the Bank of Canada pauses and falling fixed rates. While the percentage of aggregate income needed is not as impactful compared to previous months, it’s still on the upward trend from this time last year at about a 2.58% increase nationally. 

    This month’s CREA report highlights that national home sales for the year declined 11.1% from 2022, the lowest annual level since 2008. This decline was also comparable to sales levels recorded in the 5 years following the financial crisis and again in 2018, the first year the stress test was implemented. 

    “While December did offer up a bit of a surprise in sales numbers to cap the year, the real test of the market’s resilience will be in the spring,” said Larry Cerqua, Chair of CREA. 

    According to the latest report on January 15th, the following developments occurred:

    • National home sales increased 8.7% month-over-month and 3.7% year-over-year – the largest yearly gain since August.
    • The national sales-to-new listings ratio remained in balanced territory, hitting 57.8% from 50.5% in November.
    • The number of newly listed properties declined by 5.1% month-over-month – the lowest level since June.

    “While the news of an increase in monthly home sales is positive, the fact that income needed is still increasing regardless of Bank of Canada pauses and falling prices is an indicator home affordability is still out of reach for most,” says Chase Belair, Co-Founder and Principal Broker of nesto, “Yet, there’s always a positive to look forward to and for me, it’s the lower rates that we can expect towards the end of this year, giving a much-needed reprieve to home-buyers, as well as borrowers with a mortgage due for renewal in the next 6-18 months.”

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    Home Affordability Continued To Worsen Year-Over-Year In December In All Provinces 

    To better understand the impact, we turned to our proprietary data. 

    This month’s home affordability report highlights a month where income needed increased in all provinces despite home prices stabilizing and even falling slightly in Ontario. 

    These results are two-fold:

    1. A tight housing market in December placed many regions back into seller’s market territory, with fewer listings and sales picking up pace. It appears that sellers are waiting for home prices to increase again before listing, while buyers are waiting for better affordability.  
    2. As bond yields fall, borrowers are beginning to come back to fixed-rate mortgages. Although income needed increased, affordability may have made it easier for some borrowers to qualify for a mortgage and enter the housing market after sitting out the high rates we experienced throughout most of 2023. 

     Here are some highlights from our data: 

    • Quebec saw average home prices increase 3.73% year-over-year to $462,100 (from $445,500 in 2022), with the income needed increasing 5.49% to $97,380 from $92,314 in 2022.
    • Ontario logged a decrease in average home prices, falling $4,000 to $851,000. Meanwhile, the income needed increased by 1.43%, reaching $171,944 from $169,517 in 2022.
    • British Columbia noted a $36,300  increase in average home prices, which resulted in a $10,599 rise in income needed, bringing that number to $191,113 from $180,514 in 2022. 

    Calculations are based on a mortgage with a 25-year amortization, a 20% downpayment, provincially averaged property tax rate and includes $100 for monthly heating costs. Home prices are sourced from the most recent CREA report.

    Whereas income needed may have risen, some positive news is that this month, we logged 8 provinces where a borrower can own a home with under a $100,000 salary.

    8 Provinces Where You Can Still Buy A Home Under $100,000 Salary In December 2023

    Newfoundland & Labrador: $59,989

    Saskatchewan: $68,566

    New Brunswick: $70,774

    Prince Edward Island: $77,461

    Nova Scotia: $80,686

    Manitoba: $92,703

    Quebec: $97,380

    Alberta: $99,895

    2 Provinces Where You Need Over A $100,000 Salary To Buy A Home In December 2023

    British Columbia: $191,113

    Ontario: $171,944

    Find a better rate, and we’ll match it, beat it, or give you $500*.

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    Final Thoughts & Predictions for Next Month:

    December’s surge in home sales surprised many experts this month. However, it is worth noting there are still fewer opportunities to enter the housing market, with fewer home listings and income needed increasing across all provinces in Canada. We expect a similar storyline to continue in Q1 of 2024, and we hope that by Q2 of 2024, some much-needed rate cuts will occur.

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