What Happened to the Real Estate Market in Canada?
If there’s one thing, we know about Canadian real estate this year it’s that the market is hot! Houses are selling all across the country for hundreds of thousands of dollars above the asking price. Canadians are finding it tougher and tougher to become homeowners. Even Prime Minister Trudeau is committed to helping Canadians find their way into the housing market. If you’re considering buying a new home, you’re probably wondering how to navigate this market. Although it’s currently a seller’s market, there are still things you need to know to protect yourself as a buyer and find your way to owning a home in Canada today. Read on for everything you need to know about the real estate market in 2021 in Canada.
During the last 24 years, housing prices have steadily increased in the six largest Canadian real estate markets. Prices haven’t dropped and despite many predictions stating otherwise, the housing bubble has never burst. This year, however, the market took an unexpected turn. Prices have soared so high – nearly 20% more – that it has become nearly impossible for new homeowners to get into the market. Homes are commonly selling at $150,000 over the asking price. As soon as a home hits the market, the relator is inundated with visits and offers – even without an inspection.
The current housing market is currently unsustainable, especially as our economy has been weakened by Covid. Initially this year, experts predicted many Canadians would default on their mortgages after their mortgage deferrals ended and more houses would flood the market and reduce the prices. However, that didn’t happen at all. This is partially due to the record low-interest rates we are currently seeing and the government aid most unemployed Canadians have been receiving for the last year and a half.
The majority of major Canadian cities are seeing the price of the average home skyrocket – or at least that’s how the year started. Since August 2021, experts have noticed a slight drop in prices and expect them to continue dropping as interest rates rise.
How Did Covid-19 Affect the Canadian Real Estate Market in 2021?
During the pandemic, housing prices skyrocketed all over the world and Canada was no exception. But how and why? While people were quarantined in their homes, they took the time to take note of all the renovations that needed to be done and some simply decided to sell. With time on their hands and no lack of funds thanks to option of working from home, many Canadians found this to be the perfect time to sell their homes and upgrade. Of course, this led to a massive influx of houses for sale. However, buyers picked up really quickly so we quickly saw a huge inventory become a very small inventory.
With buyers searching for houses daily and fewer being list, prices started to rise – and rise, and rise some more! In the early days of the pandemic, financial analysts called for a housing crash as they believed many would be strapp for cash and in desperate need to sell their homes. However, thanks to the government’s quick emergency benefit program, most Canadians were save from financial ruin. The rest of the population continued to work from home and enjoyed the same financial benefits with increased freedom and flexibility. Those who had been saving for a vacation decided to spend on their homes instead. In the end, the analysts got it all wrong and the housing market prices increased by more than 20% from the previous year.
What Can I Buy in This Market?
At a point, condos were so hot, they were selling out in days and the prices increased as a result. During the pandemic, cities like Toronto noticed a huge drop in condo prices. Many people were renting condos out to students or using them to host Air BnB guests. In 2021, neither of these opportunities were very fruitful, which means more condos on the market. Due to the overwhelming supply, prices have dropped considerably. They do seem to be slightly rising right now so this may actually be a good time for you to get in a snag a deal before the cost of condos skyrockets. If you hang on to your new condo until that skyrocket day comes, you may also make a pretty penny.
Will There Be a Housing Market Crash?
This is a difficult thing to predict. Almost all mortgage and real estate analysts agree that a correction is likely, but not a crash. However, the Canada Mortgage and Housing Corp (CMHC) feels otherwise. They are calling for a crash to hit an estimated it will take at least one year to recover. The current unemployment rate in Canada is at 25% which is dangerously high. When the government’s economic aid comes to an end, many Canadians may find themselves unable to pay their mortgages if they haven’t yet found another job. There is a real possibility of a crash but in the last two decades, this has never happened. Only time will tell.
How to Buy Property in the 2021 Real Estate Market
For some people, buying a home simply can’t be postponed. If this is the case for you, here is what you need to know to buy in this market:
- Be patient: Buyers in 2021 will have to be extremely patient. Houses are being put on the market and selling within a single day with multiple offers over-asking. Don’t let this discourage you. Just be prepared for a long haul before you find the right property.
- Do your due diligence: The market is so hot that many homeowners are rushing to buy homes just to secure something. They are buying without seeing a home and without completing a full property inspection. Avoid doing this! This can lead to costly mistakes. Instead, wait it out until you find the right property, but never skip the inspection as this is your only protection.
- Expand your neighbourhood search: You may have to give up on that one specific neighbourhood you wanted to live in and choose something a little further out. This may be the only way to secure a house at a reasonable price. The wider you cast your net, the more likely you will be to find something.
- Meet with several brokers/agents: The market is hot right now, which means there are loads of sellers out there. Don’t feel compelled to trust just one agent or real estate broker. Feel free to get a second opinion from another broker to find the right strategy for finding a home that fits your needs.
- Prepare for a fixer-upper: Though building costs are up right now, they won’t stay this high. You can find your way into the market by purchasing an older home and waiting until process stabilize and correct before you begin your renovations. This may be the cheapest way to score a home right now.
- Stay informed: When house hunting in a seller’s market, you need to keep your eyes and ears open for opportunities all around you. Maybe you can even find someone willing to settle for a direct sale which can save you both realtor commission fees.
How to Break into the Real Estate Market for the First Time in 2021
With soaring costs, it’s no surprise that first-time home buyers are suffering the most. Those who already own homes can sell their properties for more and have acquired substantial equity to be able to purchase an upgraded home. But for first-timers, the options are few and far between. So how does one break into the real estate market for the first time in 2021? Well for starters, consider investment properties.
With high prices, mortgage payments are going to be high, especially if you have very little to put down. Investing in an income property that you intend to live in can soften the financial blow. Your tenants will help you pay your rent, your mortgage will be tax-deductible, and you can secure a loan based on the value of the rents and not on the value of your income. This is an excellent way to break into the market and build up some equity. Once your property increases in value and you have paid into it over a period of a few years, you can sell and find your perfect forever home. Another option you have is to consider buying a small townhouse as opposed to a detached home. The prices are much lower for townhouses on small plots of land than detached dwellings.
You can also get a mortgage pre-approval. Then, instead of using up all of your borrowing power on your own home, you can invest in two condos. You can live in one and rent out the other one. Some form of real estate investment will help you make some real headway in the Canadian real estate market in 2021.
How to Protect Your Financial Future in 2021
Though real estate and financial predictions are just that – predictions – we never know exactly how things will unfold. That’s why it is important to continue to make smart financial decisions so you are safe and protected in the event that things go south tomorrow. For example, let’s start with how much money you should borrow. If you are able to pay your mortgage at the current rate but are paying the minimum, you have borrowed too much.
If the rates increase – and you can be sure they eventually will – then you will no longer be able to afford your minimum payment and may have to foreclose. To avoid that, choose a mortgage value that you can pay back even if rates increase.
Canadian Government Real Estate Market Help
The Trudeau government recently announced some plans to help Canadians battle the housing market crisis as the real estate situation continues to get wildly out of control. Prime Minister Trudeau has announced that he will be prohibiting “blind bidding.” This is when others make an offer but the offer is not known to any other bidders. This would make bid amount public. Prime Minister Trudeau also plans to cut foreign investment. This is when foreign buyers drive up the price of Canadian homes to use for rental purposes. This will help cool the skyrocketing prices. And lastly, the prime minister has committed to building 1.4 million homes across Canada in the next four years.
Only time will tell if these measures are going to cool off the market and if they can be implemented in time to really make a difference. Though widely criticized, the current government is committed to implementing these tactics in the hopes of making homes more affordable for Canadian citizens. As it currently stands, most average income earners cannot afford an average home.
Buying a Home in the 2021 Real Estate Market
If you are lucky enough to snag a great deal on your dream home, congratulations! The next step is to secure financing so you can make your dream come true. If you have a poor credit history, you may find it difficult to get financing from a traditional banking institution. However, there are several lenders that offer bad credit home loans to those with low credit scores and poor credit history. We will never base our decision to loan you money on your past. We base our decision on your income and your ability to pay back the loan.
Before you begin searching for a home, meet with a BHM Financial consultant to find out what your loan options are and how much you can comfortably borrow. Once you have a set budget to work with, you can begin to look for homes in your budget. If you aren’t sure how to assess how much you can afford, don’t worry. Our financial experts can help you figure that out and will explain every step of the process to you at the same time. You can book a consultation with us to go over your budget options and even plan your repayment. We work with our clients to create a flexible repayment plan that actually works for your lifestyle.
The next step is to meet with a qualified realtor (or three!) to get some opinions on pricing in the areas you’re interested in. Your realtor should have a very good idea of what you want and be able to present you homes that fit into your budget. You may not love the first few you see, but visiting homes is a great way to learn more about what you love and don’t love. Your first home should be exactly what you want so take your time and work with professionals who want to help you make your dreams come true.
Why Should I Choose a Loan Firm Financial to Help Me Buy a Home?
In this market, you certainly don’t have time to waste. If you have debt already or have a bad credit history, you can pretty much expect a bank to refuse your loan request. The bank may want your credit rating to improve and your debt to be significantly reduced before loaning you any more for a home. Unfortunately, it can be very hard to get your finances in order if someone doesn’t give you the chance to prove yourself.
Banking institutions are about incurring minimal risk for maximum payout. Loan firms consider the human factor. They want to help you find and move into your dream home, pay off your debts, rebuild your credit and build your path to financial freedom. That’s why we don’t simply loan money out. They also offer financial advice to help you understand everything you need to know. Their experts can explain all of our loan products to you, help you choose the right one for your needs, and help you figure out what you can comfortably afford. They can also explain how mortgages work and help you navigate the 2021 real estate market. You can shop lenders like BHM Financial, Quick Loans, CashIn24, Cash Lender, and FelCanada.
If you’re looking for your forever home, we know it can be stressful. You don’t need the added worry of not being able to secure the funds you need to start your life. As a direct lender, loan firms don’t need to get your loan request approved by anyone else. They can assess each file on their own and lend you the funds you need quickly. You can have the cash you need in your hands within one single business day. If you’re concerned about your past financial mistakes getting in the way of your future, connect with a trusted loan firm today for help.