Home prices will peak in the summer before starting to slide due to declining affordability, says Desjardins Group, which presented its most recent economic and financial forecasts on Tuesday. On net, the price of houses in Quebec could fall by 12% from its peak.
Posted at 6:24 p.m.
“House prices are expected to continue to rise for a few weeks, but the peak will be reached this summer,” said Jimmy Jean, chief economist and strategist, in an interview. In Ontario, we seem to have already reached the top. »
At the end of the first quarter of 2022, the average home price in Quebec was $426,831.
Mr. Jean believes that the bottom will be reached by the end of 2023. He nevertheless wants to be reassuring. “People won’t lose their shirts. Even at the bottom of the market, home values will remain 31% above 2019 levels.
PHOTO MARCO CAMPANOZZI, PRESS ARCHIVES
Jimmy Jean, new vice-president, chief economist and strategist at Desjardins
In fact, house prices will have jumped 50% between the end of 2019 and the peak, which will be reached in the coming weeks.
The announced price drop will be caused by the erosion of affordability. This is primarily explained by the rapid rise in prices during the pandemic. In the coming months, affordability will continue to deteriorate mainly due to rising mortgage rates.
The Desjardins affordability index, at 130.9 in Quebec, is at its worst level since 2008. . Finally, the rise in mortgage rates also contributed to the tightening of access to property during the first three months of the year,” reads the latest issue of the index published on May 9.
This drop in affordability will have a downward influence on the demand for houses. “This particularly concerns first-time buyers, who make up nearly half of demand,” said Mr. Jean. He adds that the federal government has also tightened the screws on investors by requiring them to declare the profit from a quick resale of a house as 100% taxable business income. Provinces, such as Ontario, propose to add barriers to foreign investors.
Take his time
The decline in prices could have been worse, according to the economist, if the supply of properties for sale were less scarce or if population growth had not been there. These two factors combined are supporting the residential market.
In the circumstances, the chief economist of Desjardins Group suggests that buyers who have the luxury of delaying their purchase to wait to take advantage of more favorable conditions in a few months. “Anyone who is not in too much of a hurry will benefit from taking advantage of the calm that is emerging in the coming months,” he advises.
Decline in new home sales in the United States
Sales of new homes collapsed in April in the United States, weighed down by rising interest rates and record prices that are deterring many buyers from continuing their search for brand new homes. In April, 591,000 new homes were sold year on year from the previous month, a 16.6% plunge, according to Commerce Department data released Tuesday. This is the lowest level since April 2020, the very beginning of the COVID-19 pandemic. All regions are affected, although the south of the country registers the most marked decrease. The magnitude of the decline surprised economists, who had forecast 750,000 transactions. In other bad news, the March data was revised down sharply to 709,000 from the originally reported 763,000. Sales of existing homes also fell in April and even fell to their lowest level since the start of the COVID-19 pandemic, the National Federation of American Realtors (NAR) said last week.
France Media Agency