Housing prices in Canada fell six percent to $ 746,000 in April as higher interest rates poured cold water on the hot real estate market.
Home sales fell 12 percent nationwide in April, with the biggest drop in major cities like Toronto, the Canadian Real Estate Association said Monday.
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Prices peaked at a record high of more than $ 816,000 in February this year, and average house prices have been falling for two months in a row. The average price was $ 796,000 in March, before falling another six percent in April, which is usually a strong month for the housing market.
“After a record few years, housing markets in many parts of Canada have cooled sharply over the past two months, in line with rising interest rates and customer fatigue,” CREA Chairman Jill Audil said in a statement.
CREA says the average selling price can be misleading because it is easily distorted by expensive and numerous sales in major cities such as Toronto and Vancouver. He highlights a different number called the housing price index (HPI) as a better measure of the market as it adapts to the volume and type of homes sold.
HPI fell 0.6% in April, the first monthly decline in two years.
Although prices are lower than their recent peak, they remain up about seven percent from a year ago.
Still, the figures paint a picture of a housing market that is cooling off from its hectic activities just a few months ago. While the figures revealed on Monday are national in scope, the national average is falling from Toronto, where average sales prices have fallen by about $ 80,000 since March.
Real Estate Daniel Fock says this is not yet a buyer’s market, but things are showing signs that it will move in that direction. For now, this is what he calls a “beauty pageant market.”
“If a product really stands out and has a lower price, it will attract many buyers in this price range. But you don’t see it in everyone [property]He said in an interview.
Although he does not expect a major adjustment, as there are still many well-funded buyers willing to enter, he has heard of cases of buyers trying to give up expensive deals they made earlier this year.
“The challenge is, if you don’t complete the transaction and the seller wants that money, you will be responsible for that difference anyway. So in most cases, unfortunately, it is best to fulfill the contract, because at least you will finish the house, “he said.
Problem for sellers – and for some buyers
Lower prices may be welcome news for buyers trying to enter the market, but cause concern for those trying to sell – especially if they have already bought elsewhere.
Some who have bought at the highest values, assuming that their creditors will give them a certain amount, find in the valuation process that the bank values this property less than expected, forcing buyers to have to invent more than have expected in advance.
Lea Zlatkin, a mortgage broker at Lowestrates.ca, cites the example of a buyer making an offer, assuming their lender will finance 80 percent of the cost. But when the property is valued, it is valued at a number much lower than the offer price, which forces the buyer to struggle to come up with a much higher down payment than he expected.
“When home buyers have really expanded their budgets and bid above the asking price, we are beginning to see that these estimates are slightly lower in some cases,” Zlatkin told CBC News.
Keith Lancastle, chief executive of the Canadian Valuation Institute, says it’s not uncommon in foaming markets for buyers to be attracted and offered much more than the appraiser appreciates the property – and the same is true for downstream markets.
“The sale price does not drive the mortgage, the appraised value drives the mortgage and that is the value on which creditors base their decision,” he said.
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The slowing market is also worrying for those who jumped to the top and are now feeling sorry for the buyer. This is something that recent buyers Joshua Keys and Yuri Nakashima are unfortunately familiar with after buying their first home in Sudbury, Ont., Earlier this year.
Joshua Keys and Yuri Nakashima recently bought a home in Sudbury, Ont., Without a home inspection, and say they regret not doing a proper inspection of their property. (Gillian Whitley / CBC)
Since living in Vancouver, they worked with a broker from Sudbury, who the couple said did not encourage proper care, which led them to offer far above the asking price for a property that has since turned out to have many water problems and other damage, cockroach infestation and other structural problems.
They say they did not inspect the home virtually or in person before submitting their unconditional offer, regardless of the home. They say they are now facing a six-figure bill to renovate their currently uninhabited dream home.
“We hope our story will serve as a warning story for other home buyers for the first time,” Keys told CBC in an interview. “Make sure you take care of yourself, otherwise people will take advantage of your ignorance.”
“We want to make sure that doesn’t happen to other people.”
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