Canadian home buyers have appetite, but where’s the stock? Agents ask

Real estate agencies across Canada are seeing home buyers coming back in droves, but something they’re not seeing is the very thing they’re trying to sell — homes.

Royal LePage says demand is outstripping supply across the country, and because of that, it has adjusted its forecast for the remainder of the year following a “stronger-than-expected start to 2023.”

The real estate agency says it’s now expecting home prices to increase 4.5 per cent year-over-year by quarter four of 2023, even though home prices in Canada fell 9.2 per cent year-over-year in the first quarter of this year.

However, it has seen a resurgence, as compared to quarter four in 2022 and the first quarter of this year, home prices rose by 2.8 per cent, “as buyers began to come off the sidelines following the Bank of Canada’s decision last month to pause interest rate hikes for the first time in a year.”

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“There has been nothing ‘typical’ about Canada’s housing market since the start of the COVID-19 pandemic. Lockdowns brought the housing market to a grinding halt in early 2020 before the work-from-home revolution catapulted it into a two-year, all-season frenzy of record sales volumes and aggressive price growth,” said Phil Soper, president and CEO of Royal LePage.

“As markets do, this market overshot, and the inevitable correction was triggered when the Bank of Canada began to rapidly raise interest rates. The downturn came swiftly, and the real estate industry remained depressed for twelve months, a longer correction than the aftermath of the financial crisis thirteen years ago. We have turned the corner and the housing economy is growing again; none too soon for many buyers, who have been waiting patiently for prices to bottom out.”

Royal LePage says the aggregate price of a home in the country now sits at $778,300.

The price of a single-family detached home sits at $808,700, while a condominium sits at $571,700.

“Sanity is slowly returning to the housing market,” added Soper. “While some buyer hopefuls will remain sidelined by a reduced capacity to borrow in this higher rate environment, our market data shows that many of those who chose to pause their search to see where prices and interest rates would land have resumed their home buying plans. Unfortunately, the challenge they must now deal with is a severe shortage of homes for sale.”

The estate agency says that while prices have been trending upward since the start of the year, the number of available homes “remains too low to satisfy demand.” However, it does note that sales and new listings are increasing on a month-to-month basis.

“There remains a chronic shortage of housing supply in Canada, be it for rent or purchase. We are grappling with a growing problem here that once was the burden of our largest cities but is increasingly being felt in secondary markets as well,” Soper said. “Yes, governments are adopting policies intended to address the problem, yet the pace of progress is far from encouraging. And challenges facing developers – such as the increased cost of materials and labour, and a shortage of skilled tradespeople – persist.”

Regionally, while Toronto and Vancouver markets both saw decreases of over 10 per cent in home prices year-over-year in the first quarter of 2023, both markets are rebounding steadily, according to Royal LePage.

On a quarterly basis, the Greater Toronto Area saw an increase of 4.8 per cent in the first quarter of this year, while Greater Vancouver saw an increase of 1.3 per cent for the same time period.

“There is no shortage of buyers in Greater Vancouver these days. After waiting for home prices to hit a floor, buyer hopefuls have returned to the market ready to compete, a mindset that is fueling multiple-bid scenarios and zero-condition offers once again, in some cases,” said Randy Ryalls, general manager, Royal LePage Sterling Realty. “Our market continues to face extremely low levels of inventory, an issue that is sustaining competition among purchasers. As move-up buyers have little product to choose from, they continue to hold off on listing their homes for sale. This hesitation is hindering inventory turnover.”

Edmonton, Regina, and Ottawa saw the most modest rebounds in the country, with those three markets seeing their aggregate housing price rise by then than one per cent.