Broker says two main issues are creating greater uncertainty among would-be buyers
It’s been a hot topic in recent weeks: the revelation that Canadians are becoming increasingly uncertain about the future of the housing market and wider economic outlook as the COVID-19 pandemic shows little sign of easing.
The latest edition of the Bloomberg-Nanos Consumer Confidence Index saw more than half of survey respondents state that the cost of buying a home will continue rising in their neighbourhood in the next six months – compared with just 12% who believe prices will drop by then.
That pessimism is perhaps unsurprising, given the relentless price increases that have taken place across the country over the past year. Hamilton, Ontario, a port city on the edge of the Greater Toronto Area, offers a snapshot of a trend that’s been occurring throughout Canada: even with home sales on the decline since the frenzy witnessed earlier in the year, prices continue their steady climb.
According to WOWA, despite home sales in Hamilton seeing a small year-over-year decrease last month, the average sold price of a home in the city - $779,486 – has spiked by 18% since the same time last year.
Semi-detached homes and townhouses have seen a particularly dramatic price rise, registering a 23% year-over-year increase to $688,000, while detached prices are up 16% (to $855,000) and the average condo price reached $489,000 – a 29% increase since the same time last year.
Carmen Costa (pictured top), a Hamilton-based mortgage broker with Axiom Mortgage Solutions, told Canadian Mortgage Professional that those escalating prices continued to pose a real challenge to her clients hoping to buy a home in the region.
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“The uncertainty lies with the housing crisis,” she said. “It’s just not sustainable; there has to be some sort of cap. That’s the uncertainty that my clients have walking into the market: is it actually worth that price?
“On top of that, there isn’t any inventory out here. For most of my preapprovals, they’ve backed out of the market saying, ‘We’re just going to wait a couple of years to see where the market’s heading.’”
That supply issue in the housing market, an oft-discussed problem for Canada’s mortgage industry, is especially pronounced in Hamilton. New listings in the city have declined steadily from a peak of 1,030 in April to just 516 in August, with Realtors Association of Hamilton and Burlington (RAHB) president Donna Bacher calling for new measures to address that plummeting figure.
“Overall, the same story continues and that is that the level of inventory remains at critical low levels,” she said in a recent statement on housing stats in the area. “We definitely need more supply on the market.”
Those two issues – massive price rises coupled with lack of inventory – have created a sense among many prospective homebuyers that a wait-and-see approach may be more prudent in the current climate, with Costa also saying that measures such as June’s hike to the mortgage qualifying rate have further complicated matters for new entrants to the housing market.
“It would be 100% the first-time homebuyers [affected],” she said. “When you have somebody that owns a home, they can pay off debt and rejig the application. [First-time buyers] don’t have the flexibility or any more than what they had budgeted for.
“That’s where we’re seeing that niche market is the one being affected versus your second-time buyers that own a home.”
It’s unclear what the future holds for Hamilton’s housing and mortgage market, with cooling activity in recent months probably partly due to seasonal trends as well as dwindling supply.
Costa said that despite that relative slowdown, she already sensed that activity was beginning to pick up again in the city – and that the future would also likely see a significant change in brokers’ approach to the market.
“I think we’re going to be steady now. There was a slow August and September, [but] October is creeping up again,” she said.
“I think there’s going to be a big shift in the mortgage market come the end of 2022 to 2023. It’s not going to be all about rates; it’s going to be all about the mortgage brokers knowing how to put a deal together because of the repercussions of what happened with the pandemic.”
