Waterloo Region Housing Market begins 2023 with monthly increase
In terms of the Kitchener Waterloo housing market, January was a turn around month. The number of homes sold in the Waterloo Region in January 2023 was 297, a decrease of 41.9% compared to January 2022 and 31.0% below the 5-year average. The average sale price for all residential properties was $764,063, a 20.1% decrease compared to January 2022 but a 5.9% increase compared to December 2022. The average sale prices for different property types (detached, townhouses, condominiums, and semi-detached homes) all showed decreases from January 2022, but increases from December 2022.
The average sale price increased across all property types in January 2023 according to the president of the Waterloo Region Association of REALTORS (WRAR). However, the Bank of Canada’s interest rate hike to 4.5% is affecting home sales. There were 579 new listings added to the MLS System in Waterloo Region in January 2023, a decrease compared to January 2022 and the previous ten-year average. The total number of homes available for sale was 651, up 167.9% compared to January 2022 but still below the previous ten-year average. The number of months of inventory is one month, up 233.3% compared to January 2022, but still low. The average number of days to sell in January 2023 was 25, compared to 9 days in January 2022. The president of WRAR notes that there is a shift in the demographic of buyers with fewer coming from the GTA and affordability combined with supply constraints making it difficult for buyers and sellers. Working with a local realtor is the best way to navigate the market changes.
Renovation plans impacted by high interest rates
According to a recent survey conducted by FinanceIt and Leger, 39% of Canadians are delaying or reducing their renovation plans due to affordability concerns. This trend is particularly pronounced among younger respondents, with 48% of those aged 18-34 citing higher costs as the reason for postponing their renovation plans. 90% of merchants surveyed expect a slowdown in the industry this year, as customers are concerned about inflation, the economy, and the impact of interest rates on their borrowing costs. Despite higher interest rates, some homeowners are still renovating their homes due to spiralling monthly mortgage payments or the need to add a multi-generational unit to their home or generate additional rental income. The Bank of Canada has indicated that its most recent rate hike is likely to be its last for some time.
The outlook for the home renovation industry in 2023 is uncertain, with 90% of merchants surveyed by FinanceIt expecting a slowdown in the industry due to customers’ hesitance to spend due to concerns about inflation and the impact of interest rates on their cost of borrowing. However, if the economy continues to trend in the right direction, consistently high interest rates in 2023 could drive Canadians to prioritize renovating their homes instead of buying a new property. Higher interest rates and inflation have made engaging in the housing market less viable for some, which may lead to renovating their existing home as a more attractive option.
Homeownership hopes still high despite challenges
A recent survey by NerdWallet and The Harris Poll found that 67% of Canadian adults prioritize homeownership, with 43% planning to buy a property within the next five years. However, only 5% plan to buy within the next year, when interest rates are expected to be high, and 24% of those who plan to buy within the next five years haven’t started saving yet. Despite the challenges, 76% of those planning to buy a home in the next five years plan to use a down payment, and the age groups most eager to become homeowners are those aged 18-34 (37%) and 35-44 (36%). Reasons for wanting to buy a home include a belief that it’s a good investment (34%), desire to pass it down to future children (20%), wanting monthly housing payments to go toward equity (19%), and desire for more space and future planning. 70% of non-homeowners and 57% of homeowners said something, including market forces or financial challenges, is preventing them from pursuing homeownership at this time.
Housing Market Turnaround Forecasted for 2023
The Canadian housing market is expected to start a turnaround in 2023 after the effects of rising interest rates and uncertainty have subsided. Although it will still be difficult for many first-time buyers to enter the housing market due to high mortgage rates, some buyers are expected to start entering the market as rates stabilize and competition decreases. The number of properties traded via Canadian MLS® Systems is forecast to decline 0.5% to 495,858 in 2023, with a 5.9% decline in the national average home price to $662,103. In 2024, the number of national home sales is expected to rise by 10.2% to 546,625 units and the national average home price is forecast to recover by 3.5% to $685,056.