Here's why you shouldn't bet on a real estate "market crash" in the foreseeable future

Dated: July 6 2021

Views: 462

Here's why you shouldn't bet on a real estate "market crash" in the foreseeable future

 

It’s no secret that the housing market has taken a turn in the last 15 months, whether it be due to COVID-19 or other outside factors. If you’re still waiting for the right time to buy or you’re expecting the market to “crash” and housing prices to drop, here are four reasons you might want to reconsider your wait. 

 

Immigration 

 

In October 2020, the Government of Canada announced that it would be welcoming 401,000 new permanent residents in 2021, 411,000 in 2022 and 421,000 in 2023 (source: canada.ca). This is a substantial year-over-year increase in comparison to 2019 where we saw approximately 340,000 newcomers on an annual basis. This influx of people coming to Canada will strengthen the demand for housing, resulting in the price of homes going up. 

 

Low-interest rate environment

 

Throughout 2020, we saw a rapid decline in mortgage interest rates, resulting in mortgages becoming more affordable. This low-rate environment spiked the demand in housing for first-time homebuyers, making it easier to qualify as well as be approved for a higher mortgage amount. More people entering the market results in a higher demand for the product, and when the product does not meet the demand, prices, in turn, will rise. The Bank of Canada has recently announced that rates will begin to rise again in Q3 of 2022. As our economy begins to open up and stabilize, the rates will continue to rise, however it will be quite some time before the rates rise to what they were in a pre-pandemic world. 

 

Lenders are performing rigorous underwriting 

 

When you apply for a mortgage, your lender will have to complete a full application including a credit check, stress test, employment and income verification, and appraisal of the home. Over the past year, we saw a lot of uncertainty in the job market, leaving many Canadians without a stable income. This has resulted in lenders looking at applications even closer and becoming more strict with their application and appraisal requirements, meaning it’s unlikely that a seller would take a loss in the sale of their property (the true indication of a housing market crash). 

 

Strong demand

 

Even with the mortgage stress test changes, there are still more buyers than there are sellers. When there are not enough listings to meet the needs of the buyers, property values will continue to rise year over year. 

 

In conclusion


In short, unprecedented prices equals unprecedented demand. It’s highly unlikely that we will see a market crash in the near future, and if you haven’t already broken into the housing market and wish to do so, there couldn’t be a better time than the present. Contact our team of professionals to begin your search today: https://www.bosleyrealestate.com/contact.php

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Christan Bosley

Christan is a dedicated real estate professional that has been working at Bosley Real Estate since the age of 12. From front desk operations to a successful sales career to general manager, Christan ....

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